When is a blanket overhead rate used?a)When multiple products pass thr...
Explanation:
When is a blanket overhead rate used?
Blanket overhead rate is used when only one major product is being produced continuously. This method allows for a simplified calculation of overhead costs by applying a predetermined rate to the production of a single product.
Benefits of using a blanket overhead rate:
- Simple calculation: Using a single overhead rate for a continuous production process simplifies the cost allocation process.
- Cost efficiency: It reduces the administrative burden of calculating different overhead rates for multiple products.
- Consistent costing: By applying the same overhead rate to all units of the same product, it ensures consistency in costing.
Limitations of using a blanket overhead rate:
- Less accurate: Since the same rate is applied regardless of the actual overhead costs incurred, it may lead to inaccuracies in product costing.
- Not suitable for diverse product lines: This method is not suitable when multiple products pass through all departments with varying overhead costs.
In conclusion, a blanket overhead rate is used when only one major product is being produced continuously. It simplifies cost allocation and is cost-efficient for single-product manufacturing processes. However, it may not be suitable for businesses with diverse product lines or significant variations in overhead expenses.
When is a blanket overhead rate used?a)When multiple products pass thr...
A blanket overhead rate is used when only one major product is being produced continuously. In such cases, there is no need for differentiation between products or departments, and a single rate can be applied to the entire factory. Therefore, the correct answer is option B.