If the relationship between overhead costs and the cost drivers differs substantially across production departments, the firm should use:
A) a plantwide overhead rate.
B) multiple-departmental overhead rates.
C) actual overhead activity.
D) machine hours to determine the overhead rate.

Question

Quizplus · Accepted Answer

Multiple-departmental overhead rates should be used when the relationship between overhead costs and cost drivers is different across production departments. This method allows for more accurate allocation of overhead costs to each department based on the specific cost drivers for each department.

If the Relationship Between Overhead Costs and the Cost Drivers