Departmental overhead rates are generally preferred to plant-wide overhead rates when:a) the activities of the various departments in the plant are not homogeneous. b) the activities of the various departments in the plant are homogeneous. c) most of the overhead costs are fixed. d) all departments in the plant are heavily automated.

Question

Dante White

Business

13 January, 18:45

Departmental overhead rates are generally preferred to plant-wide overhead rates when:a) the activities of the various departments in the plant are not homogeneous. b) the activities of the various departments in the plant are homogeneous. c) most of the overhead costs are fixed. d) all departments in the plant are heavily automated.

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Answers (1)

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Carl · Answer 1

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

Explanation:

When the activities are homogeneous in nature then common factor for such allocation can be derived.

With that the activities overhead cost would be allocated based on that common factor.

But when the activities are not homogeneous in nature then there can not be any common basis to allocate factory overheads in that case the company uses the plant wide overhead rate that is generally predetermined based on budgets.