10 Why may departmental overhead rates NOT correctly assign overhead costs? Select one: a. The difficulties associated with identifying cost pools for the first stage of the allocation process. b. The high correlation between direct labour hours and the incurrence of overhead costs. c. The use of direct labour hours in allocating overhead costs to products rather than machine time or quantity of materials. d. The over-reliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced, lot size, or complexity of production.

10 Why may departmental overhead rates NOT correctly assign overhead costs? Select one: a. The difficulties associated with identifying cost pools for the first stage of the allocation process. b. The high correlation between direct labour hours and the incurrence of overhead costs. c. The use of direct labour hours in allocating overhead costs to products rather than machine time or quantity of materials. d. The over-reliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced, lot size, or complexity of production.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: In recent years, why has labor become such a small part of product costs and how can its use in…

A: Overhead allocation is the process of distributing indirect costs or overhead expenses to specific…

Q: Which of the following costing methods allocates overhead costs based on the direct labor hours or…

A: Lets understand the basics.Overhead costs can be allocated to product using,(1) Traditional costing…

Q: Which of the following is not a distinction between process costing and job order costing? a. Job…

A: Job costing means where actual direct cost is included in specific cost and overhead is applied on…

Q: Which of the following statements are false regarding Activity-Based Costing? Select one: O A.…

A: Solution:Correct answer : (d) Activity-based Costing follows the same basic calculation methods as…

Q: The three major differences between process and job order costing systems are those relating to:

A: Job Order Costing Process order Costing The Job Order Costing is based upon the manufacturing cost…

Q: the allocation base for applying overhead product the allocation base for applying overhead product…

A: The concept of activity-based costing requires identifying the cost pool, cost driver, number of…

Q: Typically, less accurate product costing information is produced by assigning costs…

A: The costing system includes various methods adopted by business entities for evaluating their total…

Q: d in the cost of the product b) that it is not really useful for managerial decisions c) that it…

A: A cost accounting system is a system of accounting that is helpful for the internal management to…

Q: possible for units in the beginning Work-in-Process Inventory to also be part of the ending…

A: “Since you have posted multiple questions, we will provide the solution only to the first question…

Q: Departmental overhead rates applied based on a volume measure such as direct labour-hours or…

A: Overheads are the indirect costs of manufacturing the product like indirect material costs, indirect…

Q: Under traditional costing systems, which calculate a single predetermined overhead rate using…

A: Cost refers to the monetary consideration which is incurred to produce, sell or to acquire items.…

Q: Question Content Area Which of the following is a reason for easy identification and control of…

A: c. Variable costs can be controlled by the operating management.Explanation:a. Fixed costs, such as…

Question

Why may departmental overhead rates NOT correctly assign overhead costs?

Select one:

a. The difficulties associated with identifying cost pools for the first stage of the allocation process.

b. The high correlation between direct labour hours and the incurrence of overhead costs.

c. The use of direct labour hours in allocating overhead costs to products rather than machine time or quantity of materials.

d. The over-reliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced, lot size, or complexity of production.

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Which of the following is false? Multiple Choice Overhead costing accuracy is Improved by the use of multiple departmental rates rather than a single overhead rate. The departmental overhead rate method uses more overhead rates than the plantwide overhead rate method. The departmental overhead method assigns overhead on the basis of volume-related measures. The departmental overhead rate method and the plantwide overhead rate method both comply with GAAP and can be used for external reporting. The departmental overhead rate method does not assign overhead on the basis of volume-related measures.
Which of the following statements is false? A. The departmental and traditional costing methods create cost distortions when there is significant costs associated with batch activities. B. The manufacturing overhead is applied to product by applying the POHR to actual cost drivers that occur during the production period C. The activity based costing system provides the most accurate product costing results D. Actual manufacturing overhead costs and the actual cost driver amounts are used to create the predetermined overhead rate (POHR)
9
Which of the following statements is true? O The first step in activity-based costing is to assign overhead costs to products using cost drivers ABC usually results in less appropriate management decisions Activity-based costing allocates overhead to multiple activity cost pools and assigns the cost pools to products using cost drivers O Traditional costing systems use multiple predetermined overhead rates
Organizations are motivated to use multiple indirect cost pools instead of a single indirect cost pool when Select one: O a. Multiple Indirect cost pools are needed to conform to external reporting requirements b. manufacturing overhead costs are difficult to control c. the cost drivers for the multiple indirect cost pools are different from the cost driver of the single indirect cost pool d. none of the options
f) ‘Process costing is a term used in cost accounting to describe one method for collecting and assigning manufacturing costs to the units produced.’ There are some statements about the process costing: An abnormal loss occurs when expected output exceeds actual output. The scrap value of an abnormal loss is credited to the process account. The allocated cost of an abnormal gain is credited to the process account. The inputs to a process less the normal loss is the expected output. The normal loss in a process is allocated a cost in order to reconcile the costs of inputs and outputs. The FIFO method assumes opening WIP is the first group of units to be completed. Therefore, opening WIP is charged separately to completed production and CPU is based on current period costs. Required: Please identify which of the above statements are false and explain the reasons.
Which of the following statements is false? Cost allocations such as activity-based costing allow manager to evaluate profitability of their products. A budget is a quantitative plan for acquiring and using financial and other resources over a specific forthcoming time period. A detailed activity-based costing system is costly to implement. Using different allocation base does not affect manufacturing overhead costs allocated to each product.
Overhead application to costs is a critical issue for the costing of your products. We are studying several ways to handle this situation. What would cause an overhead to be overapplied, or underapplied. Discuss the results to your decision making and the financial statements for each of those two situations.
Which of the following statements regarding activity-based costing (ABC) is NOT correct? a. Under ABC cost centres are replaced by cost pools b. Blanket overhead recovery rates (OAR) are replaced with cost driver rates c. ABC uses one common overhead recovery rate, such as labour hours. d. ABC tackles the problems of absorption costing by adopting a much more accurate way of charging overhead to cost units.