Which of the following statements is not correct concerning multiple overhead rate systems? a. None of the given answers. b. A multiple overhead rate system is more complex than a system based on a single plantwide overhead rate. C. A company may choose to create a separate overhead rate for each of its production departments. d. A multiple overhead rate system is usually more accurate than a system based on a single plantwide overhead rate. e. In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on direct labor-hour rather than on machine-hours. O C

Which of the following statements is not correct concerning multiple overhead rate systems? a. None of the given answers. b. A multiple overhead rate system is more complex than a system based on a single plantwide overhead rate. C. A company may choose to create a separate overhead rate for each of its production departments. d. A multiple overhead rate system is usually more accurate than a system based on a single plantwide overhead rate. e. In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on direct labor-hour rather than on machine-hours. O C

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 29E: A CPA would recommend changing from plantwide overhead rate application to departmental rates under...

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Similar questions

A CPA would recommend changing from plantwide overhead rate application to departmental rates under which of the following circumstances? a. The plant produces one product. b. The plant produces multiple products that may or may not pass through all producing departments. c. The plant produces multiple products that pass through all of the producing departments. d. The plant produces many different products that consume the same amount of resources in each producing department.
Explain how a plantwide overhead rate, using a unit-based driver, can produce distorted product costs. In your answer, identify two major factors that impair the ability of plantwide rates to assign cost accurately.
Why would a manufacturing company with multiple production departments still prefer to use a single plantwide overhead rate?
Under what two conditions would the multiple production department factory overhead rate method provide more accurate product costs than the single plantwide factory overhead rate method?
How do the multiple production department and the single plantwide factory overhead rate methods differ?
Activity-based department rate product costing and product cost distortions Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: The activity-base usage quantities and units produced for the two products follow: Instructions Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is 420,000 and 294,000 for the Subassembly and Final Assembly departments, respectively. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Determine the total and per-unit cost assigned to each product under activity-based costing. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods. production department factory overhead rate and activity-based costing methods.
How do the multiple production department and the single plantwide factory overhead rate methods differ?
Under what two conditions would the multiple production department factory overhead rate method provide more accurate product costs than the single plantwide factory overhead rate method?
Which of the following statements is not correct concerning multiple overhead rate systems? a. In departments that are relatively machine-intensive, their overhead costs should be applied to jobs based on direct labor-hours rather than on machine-hours. b. None of the given answers. C. A company may choose to create a separate overhead rate for each of its production departments. d. A multiple overhead rate system is usually more accurate than a system based on a single plantwide overhead rate. A multiple overhead rate system is e. more complex than a system based on a single plantwide overhead rate.
Multiple or departmental overhead rates are considered preferable to a single plantwide overhead rate when which of the following occurs? Group of answer choices individual cost drivers cannot accurately be determined with respect to the cause-and-effect relationships. various products are manufactured that do not pass through the same departments or use the manufacturing processes. manufacturing is limited to a single product flowing through a series of identical processes. cost drivers, such as direct labor hour, are the same for all processes.
A stapler manufacturer uses a single plantwide predetermined overhead allocation rate to allocate its indirect costs. The CFO thinks this process could be inaccurate. Which of the following statement is incorrect, if the manufacture makes the transition to using multiple predetermined overhead allocation rates? A. The allocation process changes because there are now multiple cost pools and multiple allocation bases. B. Management must analyze the expected overhead costs and separate them into a cost pool for each department. C. In selecting machine usage as the primary cost driver for the Production Department, management feels that there is a direct relationship between the number of machine hours used and the amount of overhead costs incurred. D. The use of multiple predetermined overhead allocation rates is more complex, but it may be more accurate.
If the activities causing overhead costs are different across different departments and products, use of a plantwide factory overhead rate will cause distorted product costs. True False