Overhead costs are assigned to production using an overhead application rate,whereas no such "application rate" is used to assign the costs of direct materials and direct labor to production.The reason for this difference in procedures is that:
A)Overhead is an indirect cost which cannot be traced easily and directly to specific units of product.
B)Overhead is always larger in dollar amount than either direct materials or direct labor.
C)The amounts of direct material and direct labor applicable to each unit of production cannot be determined as easily as the amount of overhead.
D)Overhead is always equal to a constant percentage of direct labor costs.

Question

Quizplus · Accepted Answer

Overhead costs are indirect costs and cannot be easily traced and assigned to specific units of product. On the other hand, direct materials and direct labor are direct costs that can be easily assigned to specific units of product. Hence, the overhead costs are assigned to production using an overhead application rate.

Overhead Costs Are Assigned to Production Using an Overhead Application