Overhead Absorption in Capital-Intensive Processes

Steps:

• Identify the process type: capital-intensive means heavy reliance on machinery over labor.
• Recall overhead absorption rate formula: total overhead costs divided by chosen activity base (e.g., hours).
• Select appropriate base: for machine-dominated processes, use machine hours to allocate costs accurately.
• Confirm choice: machine hours best reflects resource usage in such settings.

Why D is correct:

• In capital-intensive production, machine hours serve as the absorption base per standard costing principles, as they correlate directly with overhead consumption.

Why the others are wrong:

• A: Labor hours suit labor-intensive processes, not capital-heavy ones where machines drive costs.
• B: Identical to D, but listed separately; not the unique selector here.
• C: Overhead costs are the numerator in the rate formula, not the base for absorption.

Final answer: D