Question

One of the advantages of the departmental overhead rate method over the plantwide overhead rate method is that in the departmental overhead rate method, individual departments have their own overhead rate and allocation base.A. TrueB. False

Answer 1

Answer: A. True

Explanation: individual departments have their own overhead rates and allocation base in the departmental overhead rate method. While both rate methods are easy to implement, it is more convenient to use the departmental overhead rate method as it provides more accurate overhead costs and especially when different departments use overhead resources in substantially different ways.

The methods used in the departmental overhead rate method include:

1. Assigning overhead costs to departmental cost pools

2. Selecting an allocation base for each department

3. Compute the allocation rate for each department

4. Use the departmental overhead rates to assign costs to cost objects