There should be a strong cause-and-effect relationship between factory overhead costs incurred and the cost-allocation base chosen for its application.

Question

Quizplus · Accepted Answer

A cause-and-effect relationship should exist between the factory overhead costs incurred and the cost-allocation base chosen for its allocation as it ensures cost allocates to the final product according to the resources consumed in the production process. This relationship results in a better understanding of the cost structure and improved decision-making.

There Should Be a Strong Cause-And-Effect Relationship Between Factory Overhead