ECONOMICS

Detailed explanation-1: -Answer and Explanation: The statement is true. The departmental overhead rate includes analyzing the expense rate for every department involved in the production phase.

Detailed explanation-2: -Why are multiple overhead rates, rather than a plantwide overhead rate, used in some companies? Some companies used multiple overhead rates because plantwide overhead rate is not always accurate which can lead to overapplication on one product and under application on the other.

Detailed explanation-3: -Traditional Costing uses a single plant wide overhead rate while activity based costing uses a multiple departmental overhead rates. Multiple departmental overhead rates provide a more accurate product cost because it allocates its cost fist to the different activities that are undertaken in producing the product.

Detailed explanation-4: -If your product mix is more complex and customized, you may use multiple overhead rates to allocate costs more accurately. If one department is machine-intensive and another is labor-intensive, for example, multiple rates may be appropriate.

Detailed explanation-5: -Overhead costs in an assembly department may be allocated using direct labor hours. Departmental overhead rates will not correctly assign overhead costs in situations where a company has a range of products and complex overhead costs.