Assume that direct labor and direct materials are the major cost components of a

Question

Assume that direct labor and direct materials are the major cost components of a product and that the small amount of overhead cost can easily be associated with products using a simple overhead allocation basis such as direct labor hours. Which one of the following statements is the most correct? Activity-based costing should probably be used in this situation. Activity-based costing is probably too expensive to justify using it in this situation. Job order costing is probably too expensive to justify using it in this situation. None of these are correct

Explanation / Answer

B. They have a small amount of overhead that is easily allocated by direct labor hours, so there is no reason for using activity based costing

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