Departmental Overhead Rates May Not Correctly Assign Overhead Costs Due

question 351

Multiple Choice

Departmental overhead rates may not correctly assign overhead costs due to:

• A) the use of direct labor hours in allocating overhead costs to products rather than machine time or quantity of materials used.
• B) the high correlation between direct labor-hours and the incurrence of overhead costs.
• C) overreliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced, lot size, or complexity of production.
• D) difficulties associated with identifying cost pools for the first stage of the allocation process.

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Definitions:

Prior Probability

The probability of an event or outcome before new data is collected, often used in Bayesian statistics.

Likelihood Probability

The probability of a particular outcome or set of outcomes given a specific model or hypothesis.

State Contracts

Agreements or legal obligations between state governments and businesses or individuals for services, procurement of goods, or construction projects.

Construction Company

A business entity that specializes in the building of structures or infrastructure projects including homes, offices, and other types of buildings.