Multiple (departmental)manufacturing overhead rates are considered preferable to a single (plantwide)overhead rate when: (CMA adapted)
A) manufacturing is limited to a single product flowing through identical departments in a fixed sequence.
B) various products are manufactured that do not pass through the same departments or use the same manufacturing techniques.
C) individual cost drivers cannot accurately be determined with respect to cause-and-effect relationships.
D) the single or plantwide rate is related to several identified cost drivers.

Question

Quizplus · Accepted Answer

Multiple departmental overhead rates are more appropriate when various products are manufactured that do not pass through the same departments or use the same manufacturing techniques. This is because different products will have different levels of overhead costs associated with different departments and manufacturing techniques. Using a single plantwide overhead rate would not accurately allocate overhead costs to each product if they have different cost drivers.

Multiple (Departmental)manufacturing Overhead Rates Are Considered Preferable to a Single