In Traditional Costing Systems Overhead Costs Are Allocated on Volume

question 36

Multiple Choice

In traditional costing systems overhead costs are allocated on volume of production or sales,.This methodology fails to take into consideration that the demand for overhead activities is also driven by which of the following?

• A)Outside contracting activities.
• B)Indirect labor activities.
• C)Short-term labor activities.
• D)Batch-related and product-sustaining activities.

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Definitions:

Supervisory Costs

Indirect costs related to the salaries and benefits of supervisory staff within the production process.

Machine Hours

A measure of production activity or volume based on the number of hours machines are operating in the manufacturing process.

Idle Capacity

The portion of a company's resources or assets that are underused or not being used at all, often leading to inefficiency and increased costs.