Asked by DreamHome Furnishings on May 08, 2024
Verified
The usefulness of overhead allocations based on a plantwide overhead rate depends on two crucial assumptions: (1)the overhead cost is correlated with the allocation base; and (2)all products use overhead cost in similar proportions.
Plantwide Overhead Rate
A single, uniform overhead absorption rate used throughout a manufacturing plant or facility.
Allocation Base
A criterion or standard used to distribute costs among different cost objects, often used in the process of overhead allocation.
- Comprehend the contribution of allocation bases to the apportionment of overhead expenses.
- Realize the importance of choosing the appropriate cost allocation method for accurate product costing.
Verified Answer
RS
Rahma SherifMay 10, 2024
Final Answer :
True
Explanation :
The statement is true as these two assumptions are necessary for the plantwide overhead rate method to accurately allocate overhead costs to products. If these assumptions do not hold true, then this method may result in inaccurate product costs.
Learning Objectives
- Comprehend the contribution of allocation bases to the apportionment of overhead expenses.
- Realize the importance of choosing the appropriate cost allocation method for accurate product costing.
Related questions
Direct Labor Is an Appropriate Allocation Base for Overhead When ...
The More Activities Tracked by Activity-Based Costing,the More Accurately Overhead ...
If the Direct Labor Time Estimates Are Met,Malone Will Allocate ...
When Products Differ in Batch Size and Complexity,they Usually Consume ...
Allocated Overhead Costs Vary Depending Upon the Allocation Methods Used