Which of the following is an example of an overhead allocation base?

• A. indirect labor hours
• B. machine hours
• C. direct labor hours
• D. machine cost

Answer: (B)

An overhead allocation base is a measurable factor that reflects how overhead costs are consumed, so it should move in step with those costs. Machine hours fit that idea well because many overhead costs—utilities, machine maintenance, depreciation, and other machine-related expenses—rise with how much the machines are used. Allocating overhead based on machine hours means each product or job bears overhead in proportion to the actual machine activity it required, which aligns the burden with the cost driver.

Using machine cost isn’t a base because it’s a total cost itself, not a measure of usage. Indirect labor hours or direct labor hours can serve as bases in certain environments, but when the overhead is driven by machine activity, machine hours best captures the consumption of overhead resources.