A major drawback to using a single plantwide rate is that it is applied using a single driver for all overhead costs and it is unlikely that the driver is appropriate for every type of overhead.

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A single plantwide rate assumes that one cost driver (e.g., machine hours, labor hours) is representative of the incurrence of all overhead costs, which is often not the case, leading to inaccurate costing and decision-making. Different activities may consume resources at different rates, making a single driver inadequate for allocating all overhead costs accurately.

A Major Drawback to Using a Single Plantwide Rate Is