Learning Objective 04-P2: Allocate overhead costs using the departmental overhead rate method. When using multiple departmental rates, overhead costs must first be traced to each department

 Learning Objective 04-P2: Allocate overhead costs using the departmental overhead rate method.

When using multiple departmental rates, overhead costs must first be traced to each department and then divided by the measure of output for that department to yield the departmental overhead rate. Overhead is applied to products using this rate as products pass through each department.

 Knowledge Check 01
 
Place the following Departmental Overhead Rate Method steps in the correct order.
 
Explanation

Knowledge Check 01
 
Item #1:
Step 1 is to assign budgeted overhead cost to departmental cost pools.
 
Item #2:
Step 3 is to allocate overhead costs to cost objects.
 
Item #3:
Step 2 is to select an allocation base and compute an overhead allocation rate for each department.

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