Which of the following statements is not correct concerning multiple overhead rate systems? A) A multiple overhead rate system is more complex than a system based on a single plantwide overhead rate. B) A multiple overhead rate system is usually more accurate than a system based on a single plantwide overhead rate. C) A company may choose to create a separate overhead rate for each of its production departments D) In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours.

Question

03-01-2020
Business

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Which of the following statements is not correct concerning multiple overhead rate systems? A) A multiple overhead rate system is more complex than a system based on a single plantwide overhead rate. B) A multiple overhead rate system is usually more accurate than a system based on a single plantwide overhead rate. C) A company may choose to create a separate overhead rate for each of its production departments D) In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours.

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jepessoa jepessoa · Answer 1 · 2020-01-05T02:45:04+01:00

Answer:

D) In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours.

Explanation:

When a company is using a multiple overhead rate system, it assigns different predetermined overhead rates to each department or unit of a factory, instead of having one single overhead rate for the whole manufacturing process. The main advantage of using a multiple overhead rate system is increased accuracy, while its main disadvantage is the increased complexity of the system.

Munali Munali · Answer 2 · 2021-09-03T22:22:42+02:00

Multiple overhead rate system is a method to set a predetermined overhead rate for allocation of cost.

This method is suitable where cost driver are easy to find for specific costs. There should not be a plant wide overhead rate which is applied to all the manufacturing overhead regardless of their cost drivers.

The all three statements A, B and C are correct except for statement D.

The correct answer is therefore statement D. In departments that are relatively labor intensive, their overheads costs should be applied to jobs based on machine hours rather than on direct labor hours.

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