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Which of the following are examples of an overhead allocation base:Multiple select question.direct labor hoursindirect labor hoursmachine costmachine hours

Question

Which of the following are examples of an overhead allocation base:

  • direct labor hours
  • indirect labor hours
  • machine cost
  • machine hours
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Solution

The examples of an overhead allocation base from the options provided are:

  1. Direct labor hours
  2. Machine hours

Explanation:

Overhead allocation base refers to the criteria used to distribute overhead costs among different products or services. It is usually a measure of activity that is directly associated with the overhead costs.

  1. Direct labor hours: This is a common overhead allocation base. It is based on the assumption that overhead costs are driven by the amount of labor required to produce a product or service.

  2. Machine hours: This is another common overhead allocation base, especially in manufacturing industries where machinery is heavily used. It is based on the assumption that overhead costs are driven by the usage of machinery.

Indirect labor hours and machine cost are not typically used as overhead allocation bases. Indirect labor hours are often included in overhead costs themselves, and machine cost is a fixed cost that does not reflect the level of activity.

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