Which of the Following Statements About the Use of Direct

question 13

Multiple Choice

Which of the following statements about the use of direct labor as a cost driver is false?

• A) Direct labor is the most commonly used cost driver when calculating a predetermined overhead rate.
• B) Direct labor is gaining importance in many manufacturing applications with respect to being a significant cost driver.
• C) Direct labor is an inappropriate cost driver to use if a company is highly automated.
• D) If direct labor is a good cost driver, increases in direct labor are matched with increases in manufacturing overhead.
• E) Companies can use either direct labor cost or direct labor hours as a cost driver.

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Definitions:

FIFO

Stands for "First In, First Out," a method used in inventory and financial accounting to manage and value inventory by selling or using assets in the order they were acquired.