When Calculating a Departmental Overhead Rate, What Should the Denominator

question 141

Multiple Choice

When calculating a departmental overhead rate, what should the denominator be?

• A)Total estimated amount of the departmental allocation base
• B)Total estimated departmental overhead cost pool
• C)Total estimated amount of manufacturing overhead for the factory
• D)Actual quantity of the departmental allocation base used by the job

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Definitions:

Manufacturing Factory Overhead

All indirect costs associated with the manufacturing process, excluding direct materials and direct labor expenses.

Production Department

Definition: A specific division within a company focused on the process of producing goods and services.

Factory Overhead Rate

A measure used to allocate the total factory overhead costs to units produced, based on a predetermined activity base.

Plantwide Factory Overhead Rate

The plantwide factory overhead rate is a single rate used to allocate all of a plant's manufacturing overhead costs to its production activities, based on a common basis such as direct labor hours.