Question

Using a single rate, based on direct labor hours, to assign overhead leads to

overcompensated manufacturing costs.
accurate cost assignments.
inaccurate cost assignments.
undercompensated manufacturing costs.

Answer 1

Using a single rate, based on direct labor hours, to assign overhead can lead to inaccurate cost assignments.

Step-by-step explanation:

Using a single rate, based on direct labor hours, to assign overhead can lead to inaccurate cost assignments. This is because not all products or departments may have the same level of overhead costs. Some products or departments may require more direct labor hours than others, but still have lower overhead costs. Assigning overhead based solely on direct labor hours may overcompensate or undercompensate certain products or departments, resulting in inaccurate cost assignments.