How is variable overhead applied in a standard cost system?
A)using actual direct labour hours
B)using budgeted direct labour hours
C)using direct labour hours at practical capacity
D)using standard direct labour hours

Question

Quizplus · Accepted Answer

Variable overhead is applied in a standard cost system by using standard direct labour hours. The predetermined overhead rate is usually calculated by dividing the total budgeted variable overhead costs by the total budgeted standard direct labour hours. Therefore, D is the best choice as it reflects the use of standards in the application of variable overhead.

How Is Variable Overhead Applied in a Standard Cost System