Answer
Plantwide overhead rate is a single predetermined overhead rate that is used throughout a plant. Using multiple overhead rates instead of a single plantwide overhead rate can improve the accuracy of product cost. The allocation bases used for each department are likely to be more realistic in representing the relationship between overhead costs and the product, compared to using just one plantwide rate.
Work Step by Step
Plantwide overhead rate is a single predetermined overhead rate that is used throughout a plant. Using multiple overhead rates instead of a single plantwide overhead rate can improve the accuracy of product cost. The allocation bases used for each department are likely to be more realistic in representing the relationship between overhead costs and the product, compared to using just one plantwide rate.
