Final answer:
A plantwide overhead rate based on direct labor assumes that direct labor is the sole driver of overhead costs, but it may not accurately reflect actual cost drivers in a company.
Step-by-step explanation:
The statement about using a plantwide overhead rate based on direct labor that is correct is that a plantwide overhead rate based on direct labor assumes that direct labor is the sole driver of overhead costs in a company. This means that all overhead costs are allocated to products based on the amount of direct labor hours used.
However, this approach may not accurately reflect the actual cost drivers in a company. For example, a product that requires more machine hours may not be allocated enough overhead costs if the product has a low amount of direct labor hours.
Therefore, using a plantwide overhead rate based on direct labor may not provide an accurate reflection of the true cost of producing a product.