Question

Steps for calculating plant-wide overhead rates and assigning the rates to cost objects.

a) Identify cost pools and allocate overhead costs
b) Determine cost drivers for each cost pool
c) Calculate predetermined overhead rates
d) All of the above

Answer 1

The steps for calculating plant-wide overhead rates and assigning the rates to cost objects are: identifying cost pools and allocating overhead costs, determining cost drivers for each cost pool, and calculating predetermined overhead rates. Correct option is d)

Step-by-step explanation:

The correct answer is d) All of the above. When calculating plant-wide overhead rates and assigning the rates to cost objects, you need to perform the following steps:

1. Identify cost pools and allocate overhead costs: This involves grouping costs into different pools based on their characteristics and then allocating those costs to different cost objects, such as products or departments.
2. Determine cost drivers for each cost pool: Cost drivers are the factors that cause costs to vary in each cost pool. They are used to allocate the overhead costs to cost objects based on the activity or usage of the cost driver.
3. Calculate predetermined overhead rates: Predetermined overhead rates are calculated by dividing the estimated overhead costs for each cost pool by the estimated activity or usage of the cost driver for that pool.