Question

Using multiple department factory overhead rates instead of a single plantwide factory overhead rate a.results in more accurate product costs b.applies overhead costs to all departments equally c.results in distorted product costs d.is simpler and less expensive to compute than a plantwide rate

Answer 1

Answer: a.results in more accurate product costs

Explanation:

In a company that has multiple departments, using multiple overhead rates can help give a clearer view of product costs as costs are apportioned based on the activities in a department.

For example, in a Manufacturing company with a shipping department, you would find that it would be more accurate if for instance, machine hours are used in the Manufacturing department as opposed to labour hours being used in the Shipping department.

This method therefore gives a more accurate measure of the cost of producing different goods in a company which will go further to enable management to price products appropriately as well.

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