Which of the following condition(s) favours using departmental overhead rates in place of a plantwide overhead rate?
A) Manufacturing overhead represents a small proportion of total cost.
B) Different jobs or products use the departments to a different extent.
C) Departments use a similar amount of indirect costs.
D) Products spend the same amount of time in each department.

Question

Quizplus · Accepted Answer

Using departmental overhead rates is favourable when different jobs or products use the departments to a different extent. This allows for more accurate allocation of overhead costs to each job/product based on their actual usage of the department's resources. Option A is incorrect because the proportion of manufacturing overhead to total cost is not the deciding factor in choosing between departmental and plantwide overhead rates. Option C is incorrect because departments may use varying amounts of indirect cost. Option D is incorrect because equal time spent in each department does not necessarily translate to equal usage of departmental resources.

Which of the Following Condition(s) Favours Using Departmental Overhead Rates