ACCT 252 Chapter 4

True or false: The plantwide overhead rate method uses multiple rates to allocate overhead costs to products.

False

True or false: One of the advantages of the departmental overhead rate method over the plantwide overhead rate method is that in the departmental overhead rate method, individual departments have their own overhead rate and allocation base.

True

The two assumptions regarding the usefulness of the single plantwide overhead rate method includes:

-overhead costs change with the allocation base -all products use overhead costs in the same proportion

The advantages of using the departmental overhead rate method and the plantwide overhead method include all of the following:

-Both methods are easy to implement. -Both methods are based on readily available information. -Both methods are consistent with GAAP.

The two main assumptions of the departmental overhead rate method include:

-Different products are similar in volume and complexity and batch size -Departmental overhead costs are directly proportional to the department allocation base

Which of the following are a type of overhead allocation method?

-departmental overhead rate method -activity-based costing method -plantwide overhead rate method

Select all answers which apply. The plantwide overhead rate can be based on:

-machine hours -direct labor hours

The cost object of the cost assignment under the plantwide overhead rate method is the

Unit of Product

The main advantage of the plantwide overhead rate method is:

it is easy to implement

Each of the following are types of _____ allocation methods: plantwide rate method, departmental overhead rate method and activity-based costing method.

overhead

Using a single overhead rate to apply overhead to products is called the

plantwide overhead rate method.

Landen Company uses a single plantwide overhead rate based on direct labor hours. Total budgeted overhead costs are $200,000. Total budgeted direct materials are $50,000 and total budgeted direct labor hours are 80,000. What is the plantwide overhead rate per direct labor hour?

$2.50

A company uses the departmental overhead rate method. Total overhead costs are $6,000,000. Of this total, the machining department is assigned overhead costs of $4,000,000 and the assembly department is allocated the remainder. The machining department uses machine hours as their allocation base and has 80,000 machine hours. The assembly department uses direct labor hours as their allocation base and has 50,000 direct labor hours. Calculate the overhead rate for the assembly department.

$40 per direct labor hour

A company uses the departmental overhead rate method. Total overhead costs are $5,000,000. Of this total, the machining department is assigned overhead costs of $4,000,000 and the assembly department is allocated the remainder. The machining department uses machine hours as their allocation base and has 80,000 machine hours. The assembly department uses direct labor hours as their allocation base and has 50,000 direct labor hours. Calculate the overhead rate for the machining department.

$50.00 per machine hour

The departmental overhead rate method uses a four-step process to allocate costs objects. List these steps in the correct order:

1. Assign overhead costs to departmental cost pools. 2. Select an allocation base for each department. 3. Compute the overhead allocation rates for each department. 4. Use departmental overhead rates to assign costs to cost objects.

The _____ overhead rate method uses a different overhead rate per production department.

Departmental

True or false: The cost object of the plantwide overhead rate method is the unit of product.

True

True or false: The departmental overhead rate method uses a four-step process where costs are assigned to cost pools in the first step and the overhead rates are assigned to cost objects in the last step.

True

True or false: The main disadvantage of using the plantwide overhead rate method is that cost assignment may not accurately reflect the cost to manufacture the product

True

The plantwide overhead rate method is most appropriate for companies which have

a single product.

The _____ overhead rate method is based on readily available information as compared to the plantwide overhead rate method.

departmental

When the plantwide method is compared to the departmental overhead rate, the _____ overhead rate method results in more accurate overhead allocations.

departmental

The overhead rate method which uses a different overhead rate for each production department is the

departmental method

As it relates to the departmental overhead rate method, when products differ in batch size and complexity, they usually consume _____ amounts of overhead costs.

different

As compared to the plantwide overhead rate method, the departmental overhead rate method results in

more accurate overhead allocations.

Under the plantwide overhead rate method, total budgeted overhead costs are divided by the chosen allocation base to determine the

one overhead cost rate

The plantwide overhead rate method can be based on each of the following except

supervisor hours

One of the disadvantages of the departmental and the plantwide overhead rate methods is that

technological advances may decrease the effect of direct labor hours as a percentage of total manufacturing costs.

The departmental overhead rate method allows individual departments to have

their own overhead rate and allocation base.