Question

compared to the plantwide overhead rate method, the departmental overhead rate method usually results in more accurate overhead allocations. true or false

Answer 1

True

Explanation:

• The plantwide overhead rate method is applied when overhead costs are closely related to production volume, or when a company produces only one product. But, for a company which makes more than one product, or whose factory overhead costs are not related to production volume, the plantwide overhead rate method is the least accurate and may result in over or under-assignment of factory overhead costs to individual products.
• The departmental overhead rate method results in a better allocation of factory overhead costs to departments when overhead resources are consumed in substantially different ways. Therefore departmental overhead rate method is more accurate than the plant wide overhead rate method.