Which of the Following Is Not Typical of Traditional Costing

question 72

Multiple Choice

Which of the following is not typical of traditional costing systems?

• A) Use of a single predetermined overhead rate.
• B) Use of direct labor hours or direct labor cost to assign overhead.
• C) Assumption of correlation between direct labor and incurrence of overhead cost.
• D) Use of multiple cost drivers to allocate overhead.

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Definitions:

Returns to Scale

The rate at which production output increases in response to proportional increases in all inputs.

Average Cost

The average cost is the total cost of production divided by the number of units produced, reflecting the cost per unit of output.

Marginal Cost

The supplementary expenditure required to produce an extra unit of a product or service.

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain constant.