A managerial accountant has determined the following relationships between overhead and several possible bases: $\begin{array}{lr}\text { Basis } & \text { Correl ation with Total Overhead } \
\text { Direct labour hours } & 0.842 \
\text { Direct labour (£) } & 0.279 \
\text { Machine hours } & -0.837 \
\text { Empl oyee minutes in coffee breaks } & -0.243
\end{array}$ The best basis for overhead application is
A)direct labour hours.
B)coffee breaks.
C)direct labour (£)
D)machine hours.

Question

Quizplus · Accepted Answer

The best basis for overhead application is the one with the highest positive correlation with total overhead, which is direct labour hours (0.842).

A Managerial Accountant Has Determined the Following Relationships Between Overhead