Using a Volume-Based Overhead Rate Based on Machine Hours to Assign

Multiple Choice

Using a volume-based overhead rate based on machine hours to assign manufacturing overhead to a product line that uses relatively few machine hours is likely to:

A) Overapply overhead to the product line.
B) Underapply overhead to the product line.
C) Understate direct labor costs.
D) Overstate direct labor costs.
E) Either over- or under-apply overhead to the product line depending on many other factors.