Which basis is generally most suitable for allocating machine-related factory overhead?
Correct answer: B. Machine hours used
- A. Number of sales invoices
- B. Machine hours used
- C. Number of employees in the office
- D. Units of finished goods sold
Explanation
Machine hours provide a logical basis when overhead is mainly caused by the use of machinery. Sales invoices and office employees do not normally drive machine-related production costs.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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