Question

Which of the following statements is TRUE with regard to the use of a plantwide predetermined overhead rate (PPOHR) compared to the use of individual departmental predetermined overhead rates (DPOHRs)?
a. PPOHRs are based on outdated activity and will never be accurate for application of overhead.
b. PPOHRs are often simplistic and do not account for the best cost driver for each department.
c. DPOHRs are better for estimating costs across departments when the same allocation base is used.
d. DPOHRs are often allocated based on estimated activity for each job.

Answer 1

Answer:

c. DPOHRs are better for estimating costs across departments when the same allocation base is used.

Explanation:

In the case when the predetermined overhead rate of plantwide would be compared with the predetermined overhead rate of the individual department so the  predetermined overhead rate of the individual department  would be considered better for predicting the cost at the time when similar allocation base should be applied

Therefore the option c is correct