In labour oriented manufacturing industry which method of overhead absorption is suitable?

A. Direct material cost method

B. Prime cost method

C. Labour hour method

D. Machine hour method

Answer: Option C

Solution(By Examveda Team)

In labour oriented manufacturing industry Labour hour method of absorption is suitable. Under this method, direct labour hours are considered for determining the overhead absorption rate. This rate is obtained by dividing the overheads by the total productive hours of workers. This method is suitable for labour intensive industries where manual labour is a dominant factor of production.