Departmental overhead rates found in traditional costing systems may not correctly assign overhead costs due to: the use of direct labor hours in allocating overhead costs to products rather than machine time or quantity of materials used. overreliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced, lot size, or complexity of production. difficulties associated with identifying cost pools for the first stage of the allocation process. the high correlation between direct labor-hours and the incurrence of overhead costs