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Which of the following is a disadvantage of the departmental overhead rate method?
A) The departmental overhead rate method assigns overhead on the basis of volume-related measures.
B) The departmental overhead rate method is more refined than the plantwide overhead rate method.
C) The departmental overhead rate method does not assign overhead on the basis of volume-related measures.
D) The departmental overhead rate method is simpler and less costly to implement than the plantwide rate method.
E) There are no disadvantages of the departmental overhead rate method.
Volume-Related Measures
Metrics or indicators used to assess or track the quantity of production, sales, or services.
Allocation Basis
A criterion or method used to allocate or distribute costs among different departments, products, or activities based on certain factors or proportions.
Overhead Costs
Overhead costs are the indirect expenses associated with running a business that are not directly tied to a specific product or service, including utilities, rent, and management salaries.
- Recognize scenarios that are appropriate for the application of plantwide overhead rates in contrast to departmental overhead rates or the use of activity-based costing.
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Learning Objectives
- Recognize scenarios that are appropriate for the application of plantwide overhead rates in contrast to departmental overhead rates or the use of activity-based costing.
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