When Would Direct Labor Costs Associated with Building a Custom

question 75

Multiple Choice

When would direct labor costs associated with building a custom home be assigned to the job?

• A)Only indirect labor is assigned to construction,not direct labor.
• B)when the labor is incurred during construction
• C)after first being added to manufacturing overhead
• D)after the construction has moved from work-in-process to the finished product

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Definitions:

Activity-Based Costing

A method of costing that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.

Fabrication Activity Cost Pool

A grouping of all the costs associated with the fabrication activities in a manufacturing process, used in activity-based costing.

Idle Capacity

Idle capacity refers to the unused portion of the total capacity of a manufacturing unit which could otherwise be used to produce goods and generate revenue.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, improving the accuracy of product costing.