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Departmental overhead rates may not correctly assign overhead costs due to:

katiemarie

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Departmental overhead rates may not correctly assign overhead costs due to:

▸

the use of direct labor hours in allocating overhead costs to products rather than machine time or quantity of materials used.

▸

the high correlation between direct labor-hours and the incurrence of overhead costs.

▸

overreliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced, lot size, or complexity of production.

▸

difficulties associated with identifying cost pools for the first stage of the allocation process.

Textbook

Introduction to Managerial Accounting: Brewer Edition: 9e

Edition: 9^th

Authors: Brewer, Garrison, Noreen

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