There should be a "cause and effect" relation between the overhead allocation base and overhead costs.

Question

Quizplus · Accepted Answer

The overhead allocation base is used to allocate overhead costs to individual products or departments, based on the level of activity within that base. Therefore, there should be a direct relationship between the level of activity in the allocation base and the amount of overhead costs allocated to the products or departments using that base. This cause and effect relationship is necessary for accurate and effective overhead allocation.

There Should Be a "Cause and Effect" Relation Between the Overhead