Asked by Michelle Uzoukwu on Jul 13, 2024
Verified
When applied by service companies, the use of the single and multiple department overhead rate methods will not lead to the same kinds of cost distortions often faced by manufacturing companies with those methods.
Service Companies
Businesses that provide intangible products or services rather than physical goods.
Cost Distortions
Misallocations or inaccuracies in the assignment of costs to products or services, often leading to misleading cost information.
- Recognize the applicability and limitations of overhead allocation methods in both manufacturing and service companies.
Verified Answer
CG
Cassandra GuzmánJul 18, 2024
Final Answer :
False
Explanation :
Service companies, similar to manufacturing companies, can also face cost distortions when applying single or multiple department overhead rate methods. These methods might not accurately allocate overhead costs to services, leading to under- or over-costing similar to the issues faced in manufacturing environments.
Learning Objectives
- Recognize the applicability and limitations of overhead allocation methods in both manufacturing and service companies.
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