The traditional method of allocating overhead (using 1 rate only) may not correctly assign overhead costs due to:

1. 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
2. The high correlation between direct labour-hours and the incurrence of overhead costs.
3. Difficulties associated with identifying cost pools for the first stage of the allocation process
4. The use of direct labour-hours in allocating overhead costs to products rather than machine time or quantity of materials used.