Which of the Following Should Not Be Used as the Allocation

question 57

Multiple Choice

Which of the following should not be used as the allocation base in a company that appropriately uses a single plantwide rate?

• A) Sales volume.
• B) Machine hours.
• C) Material costs.
• D) Direct labor cost.

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Definitions:

Fixed Costs

Fixed Costs are expenses that do not vary with changes in production level or sales volume, such as rent, salaries, and equipment leases.

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Custom-decorated or pre-made cakes that are often a central dessert at birthday celebrations.

Average Variable Cost

The cost per unit of output that varies with the amount of production, such as materials and labor costs.

Fixed Costs

Financial obligations that do not change with the level of production or output within a certain range.