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Manufacturing companies vary greatly in how factory overhead and/or support department costs are allocated to production. Most companies use direct labor hours or machine hours

Manufacturing companies vary greatly in how factory overhead and/or support department costs are allocated to production. Most companies use direct labor hours or machine hours to determine the allocation as the methodology is relatively simple and straightforward. Some companies invest in an activity based costing approach and have a very precise allocation to each manufactured product. If you were the controller or cost accounting manager, which method would you recommend? Why?

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