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When is a blanket overhead rate used?
  • a)
    When multiple products pass through all departments
  • b)
    When only one major product is being produced continuously
  • c)
    When there are different overhead rates for each department
  • d)
    When the overhead expenses vary significantly
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
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.
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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.
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When is a blanket overhead rate used?a)When multiple products pass through all departmentsb)When only one major product is being produced continuouslyc)When there are different overhead rates for each departmentd)When the overhead expenses vary significantlyCorrect answer is option 'B'. Can you explain this answer?
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