A department that is capital-intensive most likely would use a predetermined departmental overhead rate based on which of the following activity bases?
A) units of direct material used
B) direct labour hours
C) direct labour cost
D) machine hours

Question

Quizplus · Accepted Answer

A department that is capital-intensive usually has a significant amount of machinery or equipment, and its expenses are primarily related to operating or maintenance costs of the equipment. Therefore, the most appropriate activity base for such a department would be machine hours. Using machine hours as the activity base for the predetermined departmental overhead rate would provide a more accurate allocation of costs to the products or services produced by the department.

A Department That Is Capital-Intensive Most Likely Would Use a Predetermined