Departmental overhead rates may correctly assign overhead costs when:

a. there is no cause-and-effect relation between direct labor hours and the cost of overhead.
b. products differ regarding the number of units produced, lot size, or complexity of production.
c. identifying activity-based cost pools for the first stage of the allocation process is difficult.
d. there is a high correlation between direct labor-hours and the incurrence of overhead costs.

The correct option is B,departmental overhead rates may correctly assign overhead costs when products differ regarding the number of units produced, lot size, or complexity of production

Explanation:

The effect of the above is that a product that consumes more of departmental resources say labor or machine hours is charged a higher overhead since the total overhead per unit would be the number of labor or machine hours per product multiplied by the overhead rate per unit.

In essence, overhead is charged to products on a fair basis and cost per unit of product is appropriately determined to aid pricing decisions.

batolisis batolisis · Answer 2 · 2020-03-13T18:39:39+01:00

Answer:

Products differ regarding the number of units produced, lot size, or complexity of production ( B )

Explanation:

The assigning of departmental overhead rates depends on some factors like the number of units produced in the department, the complexity of the production and the lot size of the goods produced.

overhead rates are cost that are associated with the production of goods and services by the production department, like the cost of operating machines ( machine hours ) they are not directly linked to the products been produced they are direct costs incurred in the production process and can be calculated using this formula

Overhead rate= Allocation measure / Indirect costs