Departmental Overhead Rates May Not Correctly Assign Overhead Costs Due

question 66

Multiple Choice

Departmental overhead rates may not correctly assign overhead costs due to:

• A) the use of direct labour-hours in allocating overhead costs to products rather than machine time or quantity of materials used.
• B) the high correlation between direct labour-hours and the incurrence of overhead costs.
• C) overreliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced,lot size,or complexity of production.
• D) difficulties associated with identifying cost pools for the first stage of the allocation process.

---

Definitions:

GAAP

Generally Accepted Accounting Principles, a collection of commonly-followed accounting rules and standards for financial reporting.

R&D Costs

Expenses associated with the research and development of a company's goods or services, often considered an investment in a company's future.

Historical Cost Principle

An accounting principle that states all assets and liabilities should be recorded and reported at their original purchase cost.

Comparability

A financial accounting principle that allows the financial statements of multiple periods or companies to be comparable with each other.