The use of departmental overhead rates will generally result in:

A) The use of a single cost allocation base.
B) The use of a single overhead cost pool for the factory.
C) The use of a separate cost allocation base for each department in the factory.
D) The use of a separate cost allocation base for each activity in the factory.
E) The use of a separate cost allocation base for each month.

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Khalifa Alsaadi · Accepted Answer

Final Answer : C, Explanation :  The use of departmental overhead rates involves allocating overhead costs to different departments within a factory, and using a specific cost allocation base for each department. This allows for a more accurate allocation of overhead costs as each department may have different activities or production processes that require varying amounts of overhead costs. Using a single cost allocation base or a single overhead cost pool may not accurately reflect the differences in overhead cost drivers between departments. Allocating costs based on each month would also not be appropriate as overhead costs may not vary by month in a predictable way.

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