COST ACCOUNTING
JOB ORDER COSTING
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
A multiple overhead rate system is more complex than a system based on a single plantwide overhead rate.
|
|
|
A multiple overhead rate system is usually more accurate than a system based on a single plantwide overhead rate.
|
|
|
A company may choose to create a separate overhead rate for each of its production departments.
|
|
|
In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours.
|
Detailed explanation-1: -A multiple overhead rate system is usually more accurate than a system based on a single plantwide overhead rate. In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours.
Detailed explanation-2: -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. Multiple overhead rates are used by big companies that have a wide variety of cost pools and cost drivers.
Detailed explanation-3: -Manufacturing overhead is incurred only to support some jobs. Which of the following statements about using a plantwide overhead rate based on direct labor is correct? It is often overly simplistic and incorrect to assume that direct labor-hours is a company’s only manufacturing overhead cost driver.
Detailed explanation-4: -Definition of multiple overhead rates manner of measuring product costs. A different predetermined overhead rate is set for each department of a factory, rather than having a single predetermined rate for the entire factory.