Which of the following statements is false? Multiple Choice Cost drivers are often selected based on the availability of information. Volume measures are good drivers for fixed overhead costs. Fixed costs that do not have a definitive cost driver are allocated using an allocation base that distributes a rational share of the cost to each product. Both direct and indirect costs can be assigned to a cost object.

Question

Business

Luke Anderson

21 October, 20:15

Which of the following statements is false? Multiple Choice Cost drivers are often selected based on the availability of information. Volume measures are good drivers for fixed overhead costs. Fixed costs that do not have a definitive cost driver are allocated using an allocation base that distributes a rational share of the cost to each product. Both direct and indirect costs can be assigned to a cost object.

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Answers (1)

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Cortez Arellano · Answer 1

Volume measure are good drivers for fixed overhead costs is the correct answer.

Explanation:

Volume measure is used in plant facilities and results when the level of activity is measured in machine hours and direct labor hours. It is different from the budget denominator entity which is used in determining the fixed overhead standard rate. If the denominator of hours exceeds the standard hours allowed then the variance is unfavorable and is favorable in the opposite case.