Overhead Absorption in Labor-Intensive Packing

Steps:

• Identify packing as a labor-intensive process driven by staff time.
• Determine overheads (e.g., supervision, utilities) arise from labor effort.
• Select basis that correlates with labor activity for equitable allocation.
• Evaluate options: labor hours best matches staff involvement.

Why B is correct:

• In absorption costing, the basis must reflect the primary cost driver; labor hours directly measure staff time, the main driver in manual packing per standard costing principles.

Why the others are wrong:

• A. Customer: Overheads stem from packing activity, not customer count.
• C. Machine hours: Packing relies on manual labor, not machines.
• D. Product: Overhead allocation should tie to effort, not product type alone.

Final answer: B