As Compared to a Low-Volume Product, a High-Volume Product

question 118

Multiple Choice

As compared to a low-volume product, a high-volume product

• A) usually requires less special handling.
• B) is usually responsible for more overhead costs per unit.
• C) requires relatively more machine setups.
• D) requires use of direct labor hours as the primary cost driver to ensure proper allocation of overhead.

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Definitions:

Direct Labor Costs

Expenses directly associated with the labor used in the production of goods or services, including wages and benefits for manufacturing or service employees.

Predetermined Overhead Rate

This is a rate used to apply manufacturing overhead to products or job orders and is established in advance based on estimated costs and activity levels.

Raw Materials Inventory

The total cost of all the materials that are used to make a product but have not yet been used in the manufacturing process.

Predetermined Overhead Rate

A rate calculated at the beginning of a period for assigning overhead cost to products or activities, based on estimated costs and activity levels.