Which of the following statements about using a plantwide overhead rate based on direct labor is correct?
A) Using a plantwide overhead rate based on direct labor-hours will ensure that direct labor costs are correctly traced to jobs.
B) Using a plantwide overhead rate based on direct labor costs will ensure that direct labor costs will be correctly traced to jobs.
C) It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver.
D) The labor theory of value ensures that using a plantwide overhead rate based on direct labor will do a reasonably good job of assigning overhead costs to jobs.

Question

Quizplus · Accepted Answer

Using a plantwide overhead rate based on direct labor-hours may not be accurate as it assumes that all manufacturing overhead costs are directly related to the amount of direct labor-hours used. However, it is often not the case as there could be other cost drivers such as machine hours, setups, or material handling. Therefore, it is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver.

Which of the Following Statements About Using a Plantwide Overhead