Question

Which statement is false?A. Using a single plantwide overhead allocation rate is the simplest method of allocating overhead costs. B. An allocation system that uses departmental overhead allocation rates is more refined than one that uses a plantwide overhead allocation rate. C. Allocation focuses on indirect costs. D. The predetermined overhead allocation rate is based on actual costs.

Answer 1

The predetermined overhead allocation rate is based on actual costs statement is false.

Option: D

Explanation:

The fixed overhead rate is being used to add overhead output to goods or job orders and is typically measured at the start of each cycle by dividing the average overhead cost of production by a distribution basis often recognized as the base of operation or driver of operation. Frequently used criteria for distribution are direct working hours, direct labor dollars, computer hours and direct resources. Every production division in large enterprises determines its own predetermined overhead rate. Thus it doesn't lie on actual cost and given statement is false.