A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labour-hours. The company's choice of the denominator level of activity affects the fixed portion of the predetermined overhead rate

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Quizplus · Accepted Answer

In a standard cost system, overhead costs are typically applied to units of product based on a predetermined overhead rate that includes both fixed and variable overhead costs, and the rate is usually based on a chosen denominator level of activity, such as direct labour-hours. Therefore, the statement that a company applies overhead costs to products in a standard cost system is true. The statement also correctly notes that the choice of denominator level affects the fixed portion of the predetermined overhead rate, since fixed overhead costs are spread over a larger or smaller number of direct labour-hours depending on the level chosen.

A Company Has a Standard Cost System in Which Fixed