All of the following statements are true except: If the base in the predetermine
ID: 2576762 • Letter: A
Question
All of the following statements are true except:
If the base in the predetermined overhead rate does not "drive" overhead costs, product costs will be distorted.
In the past, direct labor accounted for up to 60% of the cost of many products, however, this situation has changed due to sophisticated automated equipment and increased need for skilled indirect workers.
A cost driver refers to the direct materials and direct labor costs used in manufacturing environments.
A cost driver is a factor, such as machine hours, beds occupied, computer time or flight hours that causes overhead costs.
If the base in the predetermined overhead rate does not "drive" overhead costs, product costs will be distorted.
In the past, direct labor accounted for up to 60% of the cost of many products, however, this situation has changed due to sophisticated automated equipment and increased need for skilled indirect workers.
A cost driver refers to the direct materials and direct labor costs used in manufacturing environments.
A cost driver is a factor, such as machine hours, beds occupied, computer time or flight hours that causes overhead costs.
Explanation / Answer
ans a If the base in the predetermined overhead rate does not "drive" overhead costs, product costs will be distorted. Explanation The cost driver should be appropriate, if the cost driver is not appropriate than the predetermined overhead rate calculated will be incorrect and in turn the product cost will be incorrect.