Chapter 4 Extra Credit Questions: 1. Direct labor is a valid basis for allocating overhead for job order costing. 2. In recent industrial history advances in computerized systems, technology innovation, global competition, and automation has changed manufacturing environments. That is what reduced the usefulness of direct labor as the primary basis for allocating overhead to products. 3. Machine hours are frequently more relevant than direct labor hours. 4. Overhead allocation to high volume products is responsible for less overhead cost per period, where overhead allocation to low volume products under a traditional costing system is responsible for more overhead cost per unit than the high-volume. 5. Activity based costing (ABC) is an overhead cost allocation system that allocates overhead to multiple activity pools and assigns the activity cost pool to products or services. Traditional product costing is determined through overhead cost. 6. Activity-Based Overhead Rates = Overhead/ Direct Labor Hours 7. The steps involved in developing an activity based costing system are identify and classify the activities, identify the cost driver, compute the activity based overhead rate, and assign overhead costs to production. 8. A value-added/non-value added flowchart is based on an analysis of all the activities preformed to manufacture a product. The flow chart will record each activity done and the time correlating to the activity. 9. Activity cost pool is the overhead cost attributed to a distinct type of activity like ordering materials. Gathering/pooling of all the cost in one activity. 10. A cost driver is any factor or activity that has a direct cause and effect relationship with the resource consumer. 11. A cost driver is accurate and appropriate when you have a high degree of correlations that must exist between the