The Plantwide Overhead Cost Allocation Rate Is Computed by Dividing

question 217

True/False

The plantwide overhead cost allocation rate is computed by dividing the estimated total manufacturing overhead costs by the estimated total quantity of the cost allocation base.

---

Definitions:

Absorption Costing

An accounting strategy where the price of manufacturing a product is determined by adding up expenses on direct materials, direct labor, and every overhead cost, be it variable or fixed.

Markup

The extra charge applied to the acquisition cost of items intended to offset operating costs and secure a profit, which defines their market price.

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the net profit from the investment by its cost.

Traceable Fixed Expense

Costs that can be directly linked to a specific department, product, or segment of a business and do not change with the level of output or sales.