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Which of the following is a good volume-based measure to allocate variable overhead?

a. number of employees
b. units produced
c. square footage used

1 Answer

3 votes

Final answer:

The best volume-based measure to allocate variable overhead is 'units produced' as it correlates directly with production volume. Other productivity measures include quality output, resource efficiency, and economic contribution. Per-unit cost measurements apply to average costs, average variable costs, variable costs, and marginal costs. The correct option is B.

Step-by-step explanation:

The most suitable volume-based measure to allocate variable overhead from the options provided is b. units produced. This method aligns costs with the number of units manufactured, as variable overheads typically fluctuate in direct proportion to the production volume.

In contrast, the number of employees is more of a fixed cost, and square footage used isn't necessarily connected to production output and may vary due to other factors.

There are indeed other ways to measure productivity besides the amount produced per hour of work. Productivity can be assessed by evaluating factors such as quality of the output, efficiency of resource usage, and overall economic contribution. For instance, measuring productivity by innovations generated or improvements in processes can provide a more holistic understanding of productivity.

When it comes to costs measured on a per-unit basis, the average cost, average variable cost, variable costs, and marginal cost can all be calculated on this basis. Fixed costs, however, don't typically change with the level of production, so they are not usually measured per unit unless being averaged over the total output.

Production technology refers to the combination of labor, equipment, and processes used to produce goods and services. It's a key factor in determining the productive efficiency and capabilities of a business or economy.