Overhead May Be Applied Based on Direct Labor Hours or Sales

question 61

True/False

Overhead may be applied based on direct labor hours or sales salary expense.

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Definitions:

Variable Cost

Costs that change in proportion to the level of production or activity in a business.

Variable Cost Method

A pricing strategy in which the price is based on the variable costs of producing a good or service, not including fixed costs.

Cost-Plus Approach

A pricing strategy where a fixed percentage or fixed amount is added to the cost of producing a product to determine its sale price.

Total Cost Method

An accounting approach that sums up all costs associated with the production and sale of goods or services to determine total expense.