When overhead is applied on the basis of direct labour hours, the variable overhead changes in proportion to changes in the direct labour hours used.

Question

Quizplus · Accepted Answer

This is true because overhead costs such as utilities and maintenance are directly related to the amount of time machines and equipment are used, which is often determined by the number of direct labour hours worked. Therefore, as the number of direct labour hours increases or decreases, the variable overhead costs will change accordingly.

When Overhead Is Applied on the Basis of Direct Labour