Common allocation bases are a. direct labor dollars, direct labor hours, and machine dollars b. machine dollars, direct labor dollars, and direct labor hours c. direct labor dollars, direct labor hours, and machine hours d. direct labor dollars, direct labor hours, and direct material dollars

Question

Business

Karina Miranda

3 April, 08:52

Common allocation bases are a. direct labor dollars, direct labor hours, and machine dollars b. machine dollars, direct labor dollars, and direct labor hours c. direct labor dollars, direct labor hours, and machine hours d. direct labor dollars, direct labor hours, and direct material dollars

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Answers (1)

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Cory Camacho · Answer 1

The correct answer is letter "C": direct labor dollars, direct labor hours, and machine hours.

Explanation:

The allocation base is the method of assigning overhead costs to the source that causes it. More often, the allocation base is used for goods being produced in the manufacturing industry. In case the allocation base has properly been applied, changes in the allocation costs will not have a major impact on the costs of the source.

Examples of allocation bases are assigning costs of Human Resources (HR) according to the number of employees in each administrative department or direct labor dollars, direct labor hours, and machine hours in production.