When overhead is allocated come every product utilizing the same manufacturing overhead​ rate, this rate is called the departmental overhead rate.

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With increased​ competition, managers need an ext accurate approximates of product costs in bespeak to set prices and to determine the most rewarding products
Using departmental overhead prices is generally less specific than utilizing a single plantwide overhead rate.
Cost distortion occurs when some commodities are overcosted while other assets are undercosted through the expense allocation system.
Companies frequently refine their price allocation equipment to minimize the amount of cost distortion resulted in by the simpler price allocation systems.
Companies that usage departmental overhead rates trace straight materials and also direct job to price objects simply as they would certainly in a timeless costing system.
Merchandising and also service​ companies, as well as governmental​ agencies, have the right to use refined cost allocation solution to administer their managers with far better cost information.
One condition that favors using a departmental overhead​ rate, fairly than plantwide overhead​ rates, is that various departments incur different amounts and species of manufacturing overhead.
The allocation base selected for each department should be the price driver of the prices in the departmental overhead pool.
Direct labor hours would be the most suitable cost assignment base because that a Machining Department the uses an equipment robotics extensively.
ABC generally reasons the least amount of price distortion amongst products due to the fact that indirect prices are allocated come the assets based on
Four straightforward steps are used in an alphabet system. List the ideal order the these​ steps, i beg your pardon are at this time scrambled​ below: a. Determine the primary tasks and calculation a total cost pool for each. B. Clues the prices to the price object making use of the activity cost allocation rates.c. Select an allocation base because that each activity.d. Calculation an task cost allocation rate for every activity.
The usage of i m sorry of the adhering to costing equipment is most likely to reduce expense distortion come a​ minimum?
Traditional expense systems v a single−allocation base have tendency to overcost high−volume products and also undercost low−volume commodities as contrasted to activityms
There will be small benefit to making use of an activity−based costing mechanism when assets are vastly various from each other and consume different quantities of resources.

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Activityminus−based management refers to making use of activityminus−based expense information to do decisions the may increase profits if satisfying​ customers" needs.
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