Which of the following statements regarding plantwide overhead rates is true?
A) Plantwide overhead rates based on the direct labor hours or machine time works well for all company.
B) Plantwide overhead rates must use machine hours as their cost driver.
C) As the number of diverse products a company makes increases, the likelihood that a company will replace a plantwide overhead rate with a departmental overhead rate increases.
D) Plantwide overhead rates are usually more costly to prepare than a departmental overhead rate.

Question

Quizplus · Accepted Answer

As the number of diverse products a company makes increases, the likelihood that a company will replace a plantwide overhead rate with a departmental overhead rate increases. Plantwide overhead rates are not suitable for all companies, and using machine hours as the cost driver may not be appropriate. Departmental overhead rates are usually more accurate and effective, particularly for companies producing diverse products. Plantwide overhead rates are less costly to prepare than a departmental overhead rate.

Which of the Following Statements Regarding Plantwide Overhead Rates Is