Which of the Following Statements About the Use of Direct

question 41

Multiple Choice

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

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

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Definitions:

Deadweight Loss

The diminishing of economic efficiency when equilibrium in the free market for a product or service is not attained.

Benevolent

Showing kindness or goodwill, often characterized by acts of generosity or concern for others.

Monopoly Firm

A business that is the sole provider of a good or service in a market, facing no competition, which can lead to higher prices and inefficiencies.

Barrier to Entry

Factors or conditions that prevent new competitors from easily entering an industry or area of business.