A Single Plant Wide Overhead Rate T

A Single Plant Wide Overhead Rate

The simplest approach involves combining all overhead costs so that a single plant wide overhead rate can be calculated and used to apply overhead to products. The distinction between service areas and producing areas is ignored and the entire plant is treated as a single department. For example, when we applied factory overhead to products in Chapter 4 we were using a single plant wide overhead rate. This simple, one stage approach, is useful for introducing product costing concepts, but it will provide accurate product costs only in cases where the company produces a single product, or a few similar products that consume all services and other indirect resources in the same proportions in every department. If Product X consumes 10 percent of one indirect resource, it must consume 10 percent of all indirect resources for a single plant wide rate to provide accurate product costs. If a firm produces many different products that consume indirect resources in different proportions, then a two stage approach is needed to provide accurate product costs.

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A Single Plant Wide Overhead Rate The Simplest Approach Combining all overhead costs involves Plant Wide So that a single overhead rate calculated and Can be Used to Apply overhead to products. The distinction between service areas and producing areas is ignored and the entire plant is treated as a single department. For example, when we applied factory overhead to products in Chapter 4 we were using a single plant wide overhead rate. This simple, one stage approach, is useful for introducing product costing concepts, but it will provide accurate product costs only in cases where the company produces a single product, or a few similar products that consume all services and other indirect resources in the same proportions. in every department. If Product X consumes 10 percent of one indirect resource, it must consume 10 percent of all indirect resources for a single plant wide rate to provide accurate product costs. If a firm produces many different products that consume indirect resources in different proportions, then a two stage approach is needed to provide accurate product costs.