Direct labor hours are a good basis for applying overhead when

Question

Quizplus · Accepted Answer

When most direct laborers are doing the same type of work and use about the same amount of low-level technology, there is likely to be a strong correlation between the amount of direct labor hours used and the amount of overhead costs incurred. Thus, direct labor hours are a good basis for applying overhead in this situation. Options B and D suggest that overhead costs are influenced by factors other than direct labor time, while option C implies that direct labor is not a significant cost driver.

Direct Labor Hours Are a Good Basis for Applying Overhead