The Use of a Relationship of Total Factory Overhead to Direct

question 45

Multiple Choice

The use of a relationship of total factory overhead to direct labor hours is said to be valid only within the relevant range, which means:

• A) Within a reasonable dollar amount for labor costs.
• B) Within the range of observations of the cost driver.
• C) Within the range of reasonableness as judged by the department supervisor.
• D) Within the budget allowance for overhead.

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Definitions:

Uncertainty

The state of being unsure about the future or the outcomes of specific actions or events.

Expected Pay

The anticipated financial return or compensation a person expects to receive from a job, investment, or other economic activity.

Probability

A measure of the likelihood that an event will occur, expressed as a number between 0 and 1.

Hourly Rate

The amount of money paid for one hour of work.