The activity base that would be most appropriate in a capital-intensive industry is
A) direct labor dollars.
B) direct labor hours.
C) sales volume.
D) machine hours.

Question

Quizplus · Accepted Answer

In a capital-intensive industry where the cost of machinery is high, it would be appropriate to use a machine hour as the activity base. This is because the cost of the machinery is significant and it is necessary to allocate this cost to the product based on the usage of the machinery. The higher the usage of the machinery, the higher the cost of production. Therefore, machine hours would be a more accurate activity base to allocate overhead costs in such industries.

The Activity Base That Would Be Most Appropriate in a Capital-Intensive