All of the following can be used as an allocation base for calculating factory overhead rates except a. direct labor hours b. machine hours c. total units produced d. direct labor dollars

The correct answer is C. Total units produced.

Explanation:

The following five bases are generally used in calculating the application rate of manufacturing overhead:

1. Production units

2. Direct material cost

3. Direct labor cost

4. Hours of direct labor

5. Machine hours

When he mentions the Production Units, he refers to the product or merchandise produced by the company, that is, what is intended for sale, in which this method is used is very simple, since the information on the units produced is readily available. to apply indirect manufacturing costs. It is based on the unit of finished product.

C) total units produced

Explanation:

The two most common allocation bases for factory overhead are direct labor hours and machine hours, although direct labor dollars (mount spent on labor) can also be used as a variation of direct labor hours. When you are allocating overhead costs, you want to distribute overhead costs between the production processes, they should be allocated based on the amount of resources spent on the production of each unit or badge of units.

If you applied overhead costs based on total units produced, what would happen if a factory produced more than one type of finished product? And if one of those products required many more processes than the rest, should they all cost the same? E.g. a Toyota factory producing Yaris cars (small compacts) and Land Cruisers (very large SUVs) cannot allocate the same overheard costs to both a Yaris car and a Land Cruiser since 3 Yaris cars fit inside a Land Cruiser. It obviously costs more to produce a Land Cruiser, that is why you shouldn't allocate overhead costs based on total production units.  

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