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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Why might a company decide to use departmental overhead rates instead of a plantwide overhead rate?

To determine

Explain the reason for companies choosing departmental overhead rate instead of plantwide overhead rate.

Explanation

Plantwide Overhead Rate and Departmental Overhead Rates:

When a single rate is calculated for all the activities of the plant on the basis of total estimated cost and total estimated activity level, it is known as plantwide overhead rate. When overhead rate is calculated for each department on the basis of their estimated cost and estimated activity level, it is known as departmental overhead rate...

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