Using machine hours to assign manufacturing overhead to a labor intensive product line is likely to:
A) Over-apply overhead to the product line.
B) Under-apply overhead to the product line.
C) Understate direct labor costs.
D) Overstate direct labor costs.

Question

Quizplus · Accepted Answer

Using machine hours to assign overhead in a labor-intensive product line may under-apply overhead because the allocation base (machine hours) does not accurately reflect the labor-intensive nature of the production, leading to insufficient overhead being assigned.

Using Machine Hours to Assign Manufacturing Overhead to a Labor