Question

Which of the following is not typical of traditional costing systems? Use of direct labor hours or direct labor cost to assign overhead. Use of multiple cost drivers to allocate overhead. Use of a single predetermined overhead rate. Assumption of correlation between direct labor and incurrence of overhead cost.

Answer 1

The correct answer is use of multiple cost drivers to allocate overhead

Step-by-step explanation:

Use of direct labor hours or direct labor cost to assign overhead to products is typical of traditional costing systems as overhead is believed to have positive relationship with labor-related variables.

Besides,using a business-wide or plant-wide single predetermined overhead rate is not feature of traditional systems of costing.

Since labor-related variables such as direct labor hours or direct labor cost is assumed to be a driver of overhead cost,hence an appropriate overhead absorption basis,it is perfectly understood that there is correlation between direct labor and incurrence of overhead cost in the business.