Cost Behavior for Variable Overhead Is More Difficult to Predict

question 46

Multiple Choice

Cost behavior for variable overhead is more difficult to predict than the behavior of direct materials or direct labor cost for all the following reasons except:

• A) Multiple cost drivers are usually involved with variable overhead.
• B) Direct material and direct labor contain no semi-variable component.
• C) The variable portion of overhead must first be separated from the fixed portion.
• D) Variable overhead is a relatively small part of total overhead.

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Definitions:

Activity-Based Costing

A costing method that assigns costs to products or services based on the activities they require, aiming to provide more accurate product cost information.

Machine-Hours

A unit of measure representing the operating time of a machine, used in allocating costs to products based on machine usage.

First Stage Allocations

In managerial accounting, it refers to the process of allocating overhead costs initially to various departments or cost pools.

Supervising Costs

Expenses related to the management and oversight of production processes or organizational employees.