Question

What is a plantwide overhead rate? Why are multiple overhead rates, rather than a plantwide overhead rate, used in some companies?

Answer 1

The plantwide overhead rate may be a single overhead rate that a company employments to distribute all of its fabricating overhead costs to items or taken a toll objects. It is most commonly utilized in smaller substances with basic taken a toll structures. Employing a plantwide overhead rate is satisfactory within the taking after circumstances:

• The total amount of overhead to be designated is so little that utilizing multiple allotment rates to realize the next level of assignment precision is unnecessary;
• The administrations given by the different company departments are moderately comparable (a irregularity); or
• The single assignment base utilized is worthy for apportioning all of the overhead costs.

Conversely, a single plantwide overhead rate isn't satisfactory in the event that a company encompasses a huge sum of overhead to designate, administrations given by the different divisions are profoundly separated, or it is clear that a number of diverse allotment bases ought to be utilized.

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