Departmental overhead rates typically do a better job of matching each department's overhead costs to the products that use the department's resources than do plantwide overhead rates.

Question

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Departmental overhead rates allocate overhead costs based on the specific department that incurs them, providing a more accurate match to the products that use those resources. In contrast, plantwide overhead rates apply a single overhead rate to all departments, which can result in some products being over- or under-costed.

Departmental Overhead Rates Typically Do a Better Job of Matching