In a labor-intensive company in which more overhead is used by the more highly skilled and paid employees, which activity base would be most appropriate for applying overhead to production?
A) Direct labor cost.
B) Direct material cost.
C) Direct labor hours.
D) Machine hours.

Question

Quizplus · Accepted Answer

In a labor-intensive company where overhead is closely related to the cost of labor, using direct labor cost as the activity base for applying overhead is most appropriate. This is because the overhead is more likely to vary with the cost of labor rather than the number of hours worked or machine usage.

In a Labor-Intensive Company in Which More Overhead Is Used