If substantial batch-level or product-level costs exist, then overhead allocation based on a measure of volume such as direct la

Question

2 years ago

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If substantial batch-level or product-level costs exist, then overhead allocation based on a measure of volume such as direct la

bor-hours alone:
a. must be used for external financial reporting since activity-based costing cannot be used for external reporting purposes
b. will systematically over cost high-volume products and under cost low-volume products
c. is a key aspect of the activity-based costing model
d. will systematically over cost low-volume products and under cost high-volume products

Business

1 answer:

Galina-37 [17] · Answer 1 · 2023-04-25T08:48:56+03:00

Answer:

b. will systematically over cost high-volume products and under cost low-volume products

Explanation:

if we have a substantial batch level or product level cost exist thenthe overhead allocationshould be on the basis of direct labor hours because it will helpfully charge actual cost of overhead to that department as per actual labor hours used for that and it willa also help to overcost high volume products and undercost low volume products.