Volume-based rates are appropriate in situations where the incurrence of factory overhead:

Question

Quizplus · Accepted Answer

Volume-based rates are appropriate when the incurrence of factory overhead costs is related to a single, common cost driver. This cost driver could be direct labor hours, machine hours, or units produced. The use of a single cost driver simplifies the allocation process, and ensures that the allocation of factory overhead costs is done in a systematic and equitable manner. If there are multiple cost drivers or non-homogeneous cost drivers, then a different method of allocating factory overhead costs would be more appropriate.

Volume-Based Rates Are Appropriate in Situations Where the Incurrence of Factory