Question

Departmental rates are appropriate when all the following exist except: A. Not all products pass through the same processes.B. Departments are not similar in function.C. Departments have dissimilar cost drivers.D. All departments have similar cost drivers and cost usage characteristics.E. Products consume departmental resources in a significantly different manner.

Answer 1

Answer:

D. All departments have similar cost drivers and cost usage characteristics.

Explanation:

An organizational structure can be defined as the process which typically involves dividing an organization into various functional units.

Basically, the organizational structure comprises of three (3) main dimensions and these are;

I. The vertical dimension: this is typically the decision-making responsibilities (decentralization and centralization).

II. The horizontal dimension: this divides the organization into subunits.

III. Integrating mechanisms: it is based typically on the strategic mechanism that controls the various subunits within an organization.

Manufacturing costs can be defined as the overall costs associated with the acquisition of resources such as materials and the cost of converting these raw materials into finished goods. Manufacturing costs include direct labor costs, direct materials cost and manufacturing overhead costs.

A departmental rate can be defined as the expenses that are calculated with respect to the departments in the production process of a factory.

Generally, when all the departments of an organization have or incurs similar cost drivers and cost usage characteristics, using departmental rates isn't appropriate.