Choosing direct labor cost rather than direct labor hours as a cost driver for overhead costs implies that ________.
A) direct labor cost data is more accurate
B) direct labor cost data is easier to obtain
C) higher paid employees use proportionately less overhead support than lower paid employees
D) higher paid employees use proportionately more overhead support than lower paid employees

Question

Quizplus · Accepted Answer

Choosing direct labor cost as a cost driver implies that higher paid employees use proportionately more overhead support than lower paid employees. This is because higher paid employees typically have more benefits, such as health insurance and retirement plans, which are included in overhead costs. Therefore, using direct labor cost as a cost driver provides a more accurate reflection of the actual overhead costs incurred by each employee.

Choosing Direct Labor Cost Rather Than Direct Labor Hours as a Cost