Question

Ivanhoe Company applies manufacturing overhead based on direct labor hours. What is the method used by Ivanhoe Company to apply manufacturing overhead?

1) Direct labor cost method
2) Activity-based costing method
3) Direct labor hours method
4) Machine hours method

Answer 1

The method used by Ivanhoe Company to apply manufacturing overhead is the Direct labor hours method.

Step-by-step explanation:

The method used by Ivanhoe Company to apply manufacturing overhead is the Direct labor hours method. This means that the company allocates manufacturing overhead based on the number of direct labor hours required for production.

For example, if a product requires 10 hours of direct labor to produce and the manufacturing overhead rate is $20 per labor hour, then $200 of manufacturing overhead will be applied to the product.

By using the direct labor hours method, Ivanhoe Company can allocate manufacturing overhead more accurately based on the labor-intensive nature of its production process.