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Which overhead method applies a different rate in each department but one single rate to every product inside that department?
ADepartmental rates applied within each department
BA single factory wide rate applied to all jobs
CActivity based costing applied to each activity
DA machine hour rate applied across the factory
Answer & Solution
Correct answer: A. Departmental rates applied within each department
1. Three ways of absorbing factory overhead are available: a single factory wide rate, departmental rates, and activity based costing.
2. Departmental rates give each department its own rate, but every product passing through that department carries the same rate.
3. A single factory wide rate uses one rate for every department, so it cannot vary by department.
4. Activity based costing sets a rate for each activity regardless of department, which is finer than a departmental rate.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 4.1 Introduction_
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