Single Plantwide method
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Question
When is the Single Plantwide method preferred over the Multiple Department method, if ever?
Expert Solution
Step 1
A plantwide overhead rate is a way of distributing manufacturing overhead costs to the costs of the business's goods and cost objects.
It often fits small businesses and has a straightforward cost structure.
However, there are a few circumstances where its use is appropriate:
- The overall amount of the overhead expenses that must be allocated is insufficiently global.
- It is not necessary to use several allocation rates to drive a higher degree of allocation.
- The company's numerous sections all offer a similar kind of service.
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