Which of the following circumstances must be present for departmental overhead allocation to be favored over a traditional overhead allocation method? A. Each department incurs different types and amounts of manufacturing overhead. B. Each product, or job, uses the department to a different extent. C. Both A & B D. None of the above. Traditional overhead allocation is more accurate than departmental overhead allocation.

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Business

Cassandra Best

11 February, 08:23

Which of the following circumstances must be present for departmental overhead allocation to be favored over a traditional overhead allocation method? A. Each department incurs different types and amounts of manufacturing overhead. B. Each product, or job, uses the department to a different extent. C. Both A & B D. None of the above. Traditional overhead allocation is more accurate than departmental overhead allocation.

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Princess Shea · Answer 1

B. Each product, or job, uses the department to a different extent.

Explanation:

Departmental overhead rates uses a standard charge that is based on produced units attributed to a department.

Costs are applied with high precision.

When this model is used, the standard rate is multiplied by the number of units produced in the department, so there is no over allocation of resources.

For example if we consider the hours a machine operates. With a standard rate of $10 per hour, machine operation of 6 hours will give $10 * 6 hours = $60