Which of the Following Is NOT a Limitation of a Plantwide

question 46

Multiple Choice

Which of the following is NOT a limitation of a plantwide overhead rate?

• A)Product diversity may consume overhead activities under differing consumption ratios.
• B)Overhead usage is not strictly linked to the units produced because some products are more complex and diverse than others.
• C)Predetermined rates using budgeted overhead are usually the best estimate of the amount of overhead.
• D)Overhead costs tend to be underallocated to highly complex products.

---

Definitions:

Initial Value Method

Initial Value Method is an accounting approach where investments are recorded at their purchase cost, without subsequent adjustments for changes in fair value.

Consolidated Net Income

The total net income of a parent company and its subsidiaries after adjusting for intercompany transactions.

Intra-Entity Transfers

Transactions involving the transfer of goods, services, or resources between divisions or entities within the same company.

Operating Income

The profit realized from a business's core operations, excluding deductions of interest and taxes.