Humphries Construction Company builds warehouses that range in size from 12,000 to 100,000 square feet.Which of the following would not be a rational base for allocating overhead costs to the warehouses?
A) Labor hours
B) Direct material costs
C) Number of warehouses completed
D) Square footage of the warehouses

Question

Quizplus · Accepted Answer

The number of warehouses completed is not a rational base for allocating overhead costs because it does not directly correlate with the resources consumed or the complexity of each project. Overhead costs are more accurately allocated based on factors that reflect the amount of resources used, such as labor hours, direct material costs, or the square footage of the warehouses, rather than simply the count of warehouses completed.

Humphries Construction Company Builds Warehouses That Range in Size from 12,000