Asked by Victoria Nguyen on Jun 18, 2024
Verified
Some companies allocate their overhead cost using a plantwide overhead rate largely because of its simplicity.
Plantwide Overhead Rate
A single overhead absorption rate calculated for an entire manufacturing plant and applied to all units produced, simplifying the allocation of indirect costs.
Overhead Cost
Expenses related to the operation of a business that cannot be directly linked to a specific product or service.
Simplicity
The quality of being easy to understand or use; the absence of complexity or complication.
- Understand the concept of overhead cost allocation and its significance in managerial decision-making.
- Recognize the advantages and disadvantages of using a plantwide overhead rate for overhead cost allocation.
Verified Answer
ER
emmanuel reynaJun 23, 2024
Final Answer :
True
Explanation :
Plantwide overhead rate method involves applying a single overhead rate to all products based on their direct labor hours, machine hours, or another suitable allocation base. This approach is easy to use and often preferred by small companies or those with relatively simple operations.
Learning Objectives
- Understand the concept of overhead cost allocation and its significance in managerial decision-making.
- Recognize the advantages and disadvantages of using a plantwide overhead rate for overhead cost allocation.