A volume-based rate is an appropriate overhead application base when:
A)Several well-differentiated products are manufactured.
B)Direct labor costs are large.
C)Direct material costs are large relative to direct labor costs incurred.
D)Only one product is manufactured.
E)Manufacturing is process-based.

Question

Quizplus · Accepted Answer

A volume-based rate is suitable when only one product is manufactured because it simplifies the allocation of overhead costs, as there is no need to differentiate between multiple products.

A Volume-Based Rate Is an Appropriate Overhead Application Base When