T/F 5. A major disadvantage ofunga plantwide overhead rate is the extreme diffic
ID: 2335748 • Letter: T
Question
T/F 5. A major disadvantage ofunga plantwide overhead rate is the extreme difficulty a plan ngathering the n ness of overhead allocations based on a plantwide overhead rate depends on ucial assumptions: (1) the overhead cost is correlated with the allocation base: and T/F 6. The usefulness allcaton tw (2) all products use overhead cost in dissimilar proportions. ome companies llcate their overhead cost using a plantwide overhead rate largely because of its simplicity e different When products differ in batch size and complexity, they usually consum amounts of overhead resources T/F 8. Overhead costs are often affected by many issues and are frequently too complex to be explained by any one factor. T/F 9. Compared to the departmental overhead rate method, the plantwide overhead rate method usually results in more accurate overhead allocations. T/F 10. T/F 11. The use of a plantwide overhead rate is not acceptable for external reporting under GAAP T/F 12. ABC allocates overhead costs to products based on input measures rather than output measures. T/F ABC is significantly less costly to implement and maintain than more traditional overhead costing systems. 13. T/F When using the plantwide overhead rate method, total budgeted overhead costs are combined into one overhead cost pool. 14. The departmental overhead rate method traces costs to each department and then determines an allocation base for each department. T/F 15. Activity-based costing involves four steps: (1) identify activities and the costs they cause, (2) group similar activities into cost pools, (3) determine an activity rate for each activity cost pool, and (4) allocate overhead costs to products using those activity rates. T/F 16.Explanation / Answer
5. False
The plantwide overhead rate is a single overhead rate that a company uses to allocate all of its manufacturing overhead costs to products or cost objects.
6. False
(1) overhead costs change with the allocation base (such as direct labor hours); and (2) all products use overhead costs in the same proportions.
7. True
8. True
9. True
10. False
The Departmental overhead rate method results in more accurate overhead allocations as compared to the plantwide overhead rate method.
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