Choosing Direct Labor Cost Rather Than Direct Labor Hours as a Cost

question 91

Multiple Choice

Choosing direct labor cost rather than direct labor hours as a cost driver for overhead implies that:

• A) direct labor cost data is easier to obtain
• B) higher paid employees use proportionally more support cost
• C) lower paid employees use proportionally less support cost
• D) direct labor hour data is easier to obtain

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Definitions:

Division Revenues

The income generated from the operations of a specific division within a larger corporation or organization.

Managers

Individuals responsible for planning, organizing, leading, and controlling resources to achieve organizational goals.

Parent Company

A corporation that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors.

Profit Centers

Divisions or departments within a business that are treated as separate entities for the purpose of financial reporting, with their own revenues and expenses.