Which of the following would be the best for allocating overhead?
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A. Manufacturing overhead hours if the hours are divisible by two |
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B. Direct materials if the allocation would be fair |
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C. A cost driver |
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D. Direct labor dollars if all jobs used direct labor |
Your required answer is option D i.e. Direct labor dollars if all jobs used direct labor
Explanations:
Overhead allocation means allocation of indirect cost to production cost. So if all jobs are using direct labor then it is best to use the direct labor dollars, Because If every jobs are using the direct labor then it would be a smooth process to allocate the overhead in all jobs.
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