Question

Which of the following statements is true with regard to the departmental overhead rate method?

A. It is especially accurate in assigning overhead costs that are not drivby production volume.
B. It uses a different overhead rate for each department Each department has the same rate for the same activity pool
C. It requires one overhead cost pool and one rote
D. It is the same as activity-based costing,

Answer 1

The departmental overhead rate method uses different overhead rates for each department, but the same rate for the same activity pool within a department.

Step-by-step explanation:

The correct statement regarding the departmental overhead rate method is Option B: It uses a different overhead rate for each department. Each department has the same rate for the same activity pool.

The departmental overhead rate method involves allocating overhead costs to different departments based on the specific activities or resources used by each department. Each department is assigned a different overhead rate to account for the variation in activity levels and resource consumption. However, within the same department, the overhead rate remains constant for a specific activity pool.

For example, if a company has two departments, Department A and Department B, and both departments use machine hours to allocate overhead costs, they may have different rates for machine hour usage. However, within Department A, the rate for machine hours would be the same for all activities that require machine usage.