Kaumajet Factory produces two products: table lamps and desk lamps. It has two separate departments: Fabrication and Assembly. The factory overhead budget for the Fabrication Department is $550,000, using 500,000 direct labor hours. The factory overhead budget for the Assembly Department is $400,000, using 80,000 direct labor hours.
-Using multiple department factory overhead rates instead of a single plantwide factory overhead rate
A)results in more accurate product costs
B)results in distorted product costs
C)is simpler and less expensive to compute than a plantwide rate
D)applies overhead costs to all departments equally

Question

Quizplus · Accepted Answer

Using multiple department factory overhead rates leads to more accurate product costs because it allocates overhead costs based on the actual usage of resources by each product in different departments, rather than spreading costs uniformly across all products regardless of their specific departmental resource consumption.

Kaumajet Factory Produces Two Products: Table Lamps and Desk Lamps