Departmental overhead rates are generally preferred to plant-wide overhead rates

Question

Departmental overhead rates are generally preferred to plant-wide overhead rates when:

the activities of the various departments in the plant are not homogeneous.

the activities of the various departments in the plant are homogeneous.

most of the overhead costs are fixed.

all departments in the plant are heavily automated.

the activities of the various departments in the plant are not homogeneous.

the activities of the various departments in the plant are homogeneous.

most of the overhead costs are fixed.

all departments in the plant are heavily automated.

Explanation / Answer

When activities in the plant are different that is not homogenous, it is best to use different overhead allocation rates for each department. This would lead to more accurate allocation of overhead costs than a single rate for each department.

So, option A is the most appropriate solution.

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