Direct Labor Is Sometimes the Appropriate Basis for Assigning Overhead

question 124

Multiple Choice

Direct labor is sometimes the appropriate basis for assigning overhead cost to products. It is appropriate to use direct labor when which of the following is true?
(1) Direct labor constitutes a significant part of total product cost.
(2) A high correlation exists between direct labor and changes in the amount of overhead costs.

• A) (1) only
• B) (2) only
• C) Either (1) or (2)
• D) Both (1) and (2)

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Definitions:

Incisors

The front teeth in mammals, typically characterized by their sharp edges for cutting food.

Complex Carbohydrate

Carbohydrates consisting of long chains of monosaccharide units bound together, offering energy and fiber.

Sucrose

A disaccharide composed of glucose and fructose, commonly known as table sugar and used as a sweetener and preservative.

Gallbladder

A small organ located under the liver that stores bile, a fluid produced by the liver to digest fats.