Which of the Following Is a Disadvantage of the Departmental

question 62

Multiple Choice

Which of the following is a disadvantage of the departmental overhead rate method?

• A)It may fail to accurately assign many overhead costs that are not driven by production volume.
• B)Allows each department to have its own overhead rate.
• C)Allows each department to have its own allocation base.
• D)The departmental overhead rate is usually more accurate in overhead allocations than the plantwide overhead rate.
• E)The departmental overhead rate is consistent with GAAP and can be used for external reporting.

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Definitions:

Direct Labor

The workforce directly involved in manufacturing a product or delivering a service, whose costs are directly attributable to the product.

Variable Manufacturing

Costs in manufacturing that vary with the level of production output, such as raw materials and labor costs.

Factory Overhead

All indirect costs associated with manufacturing, such as utilities, maintenance, and depreciation of equipment, excluding direct materials and direct labor.

Direct Labor

Direct labor refers to the work of employees directly involved in the manufacturing of products.