In selecting machine usage as the primary cost driver of overhead costs for the Production Department, management feels that there is a direct relationship between the number of machine hours used and the amount of overhead costs incurred. True False

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Business

Brent Manning

10 March, 03:33

In selecting machine usage as the primary cost driver of overhead costs for the Production Department, management feels that there is a direct relationship between the number of machine hours used and the amount of overhead costs incurred. True False

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Milton Cooke · Answer 1

True

Explanation:

Machine is the key component while processing the raw material into finished goods.

This is related to the goods as machine hours are directly related with the number of units.

Accordingly, there is a belief of management that the overheads are directly related to machine hours.

And thus, they are allocated based on machine hours under traditional costing. As therefore, the statement is true as states all of the above things.