Unit-level cost drivers are most appropriate as an overhead assignment base when ________.
A) several complex products are manufactured
B) only one product is manufactured
C) direct material costs are low
D) prime costs are low

Question

Quizplus · Accepted Answer

Unit-level cost drivers, such as direct labor hours or machine hours, are most appropriate as an overhead assignment base when only one product is manufactured. This is because unit-level costs vary in direct proportion to the volume of production, and when only one product is being manufactured, it is easier to assign overhead costs to that product based on its specific unit-level cost drivers. In contrast, when several complex products are being manufactured, it may be more difficult to identify the specific unit-level cost drivers for each product, and other overhead assignment methods may be more appropriate. Low direct material costs or prime costs do not necessarily impact the appropriateness of unit-level cost drivers as an overhead assignment base.

Unit-Level Cost Drivers Are Most Appropriate as an Overhead Assignment