Question

Using a plantwide factory overhead rate distorts product costs when: O a. significant differences exist in the factory overhead rates used across different production departments b. products require different ratios of allocation-base usage in each production department c. Both "products require different ratios of allocation-base usage in each production department" and "significant differences exist in the factory overhead rates used across different production departments are true. d. Neither "products require different ratios of allocation-base usage in each production department" nor significant differences exist in the factory overhead rates used across different production departments" are true.

Answer 1

Option c, Both products require different ratios of allocation-base usage in each production department and significant differences exist in the factory overhead rates used across different production departments

Reason: If there are significant differences in ratios and factory overhead rates, using a single plantwide overhead rate may underprice one department and overprice the other during a pricing strategy. A multiple production department factory overhead rate will be more accurate.