Question

The fact that one department may be labor intensive while another department is machine intensive explains in part why multiple predetermined overhead rates are often used in larger companies True or False 47:06 True False

Answer 1

Answer:

True

Explanation:

Overhead is the total of indirect cost that is involved in the production of a good. An overhead could be made up of a budgeted cost or actual cost. Overhead is appropriate when it does not exceed 35% of the total revenue.

Because a large company could produce different goods, those goods undergo different process and as result of that, require different costs of production.

For this reason, departmental overhead rates are calculated to ensure that every part of the company has its own production cost and expenses set aside rather than having a general or single company overhead rate which could favor some departments and not favor some other departments.

Cheers.