Required 1 Required 2 Required 3 Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a plantwide predetermined overhead rate based on direct labor-hours, rather than using departmental rates?

Required 1 Required 2 Required 3 Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a plantwide predetermined overhead rate based on direct labor-hours, rather than using departmental rates?

Financial & Managerial Accounting

13th Edition

ISBN:9781285866307

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter26: Cost Allocation And Activity-Based Costing

Section: Chapter Questions

Problem 4DQ: Under what two conditions would the multiple production department factory overhead rate method...

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Required 1 Required 2 Required 3
Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a
plantwide predetermined overhead rate based on direct labor-hours, rather than using departmental rates?

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A. B. C. D.
5 Why may departmental overhead rates NOT correctly assign overhead costs? Select one: a. Because of the high correlation between direct labour hours and the incurrence of overhead costs. b. Because of the use of direct labour hours in allocating overhead costs to products rather than machine time or quantity of materials. c. Because of 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. d. Because of the difficulties associated with identifying cost pools for the first stage of the allocation process.
How do the multiple production department and the single plantwide factory overhead rate methods differ?
Under what two conditions would the multiple production department factory overhead rate method provide more accurate product costs than the single plantwide factory overhead rate method?
Under what conditions might a company use activity-based costing to allocate factory overhead to products?
Activity-based costing systems: A. use a single predetermined overhead rate based on machine hours instead of on direct labor B. frequently increase the overhead allocation to at least one product while decreasing the overhead allocation to at least one other product C. limit the number of cost pools D. always result in an increase of at least one products selling price
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Question 1?
Question 5?
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.
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