In a standard cost system, variable overhead is applied
A) using actual direct labor hours.
B) using budgeted indirect labor hours.
C) using direct labor hours at practical capacity.
D) using standard direct labor hours.
E) All of these.

Question

Quizplus · Accepted Answer

In a standard cost system, variable overhead is applied using standard direct labor hours. This is because direct labor hours are a logical base for applying variable overhead, as the cost of direct labor is often highly correlated with the cost of variable overhead. Using standard direct labor hours helps ensure that the variable overhead rate is based on a realistic estimate of how much indirect cost will be incurred for each unit of direct labor.

In a Standard Cost System, Variable Overhead Is Applied