Learning Objective 04-P1: Allocate overhead costs using the plantwide overhead rate method. The plantwide overhead rate equals total budgeted overhead divided by budgeted plant volume, the latter often measured in direct labor hours or machine hours.

 Learning Objective 04-P1: Allocate overhead costs using the plantwide overhead rate method.

The plantwide overhead rate equals total budgeted overhead divided by budgeted plant volume, the latter often measured in direct labor hours or machine hours. This rate multiplied by the number of direct labor hours (or machine hours) required for each product provides the overhead assigned to each product.

Knowledge Check 01
 
Select from the three alternative methods of overhead allocation in the drop down list so that it matches with the provided feature.

 

Knowledge Check 01
 
When using the plantwide overhead rate method, the cost object is
 
multiple choice

    unit of product Correct
    direct labor hours
    machine hours
    the activity

Answer
unit of product
Explanation

Knowledge Check 01
 
The plantwide overhead rate method uses one overhead rate to allocate overhead costs to products and the target of the cost assignment, or cost object, is the unit of product.
 

 

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