Which of the following statements about using the direct labor hour method of applying factory overhead to production is false?
A)It may not be as accurate as the direct labor cost method if factory overhead primarily consists of items more closely tied to employee wages,such as benefits.
B)The application base could be substantially smaller than when direct labor cost is used.
C)It is the most appropriate method for a highly automated department.
D)The amount of factory overhead applied is not affected by the mix of labor rates.

Question

Quizplus · Accepted Answer

The direct labor hour method is not the most appropriate method for highly automated departments because in these departments, direct labor is a small proportion of the cost of production and the activity base should reflect the actual consumption of overhead resources. A more appropriate method would be machine hour method or another activity-based costing method that allocates overhead based on the drivers of overhead costs in highly automated departments.

Which of the Following Statements About Using the Direct Labor