Which of the following are actual factory overhead allocation methods?

Question

BlackTom AI · Accepted Answer

Factory overhead allocation methods include single plantwide rates, departmental (multiple production department) rates, and activity-based costing (ABC).

1) Relevant concepts:
- Single plantwide rate: one overhead pool is divided by a single allocation base (e.g., total direct labor hours or machine hours) to produce one rate applied to all jobs or products.
- Multiple production department rates (departmental rates): separate overhead pools and bases for each production department; overhead is allocated using the department-specific rate and then routed to products/jobs.
- Activity-based costing (ABC): many activity cost pools are created and each pool is allocated to products using an appropriate cost driver; ABC aims for more accurate cause-and-effect allocation.

2) Step-by-step reasoning:
- List standard, accepted allocation methods: plantwide, departmental, and ABC. These are commonly taught in managerial accounting as progressively more refined approaches to allocate factory overhead.
- Compare each answer option to that list:
  - Option 1: single plantwide rate, multiple production department rates, and ABC — matches the three accepted methods.
  - Option 2: multiple department rates, ABC, and “factory costing” — missing plantwide rate and includes “factory costing,” which is not a standard distinct allocation method.
  - Option 3: “factory costing,” single plantwide rate, and ABC — contains plantwide and ABC but replaces departmental rates with the ambiguous “factory costing.”
  - Option 4: “factory costing,” single plantwide rate, and multiple department rate methods — has plantwide and departmental but omits ABC and again uses the vague “factory costing.”

3) Why the correct answer is correct:
- Option 1 explicitly lists the three recognized allocation approaches (plantwide, departmental, ABC). Each is a legitimate, distinct method with specific procedures and purposes.

4) Why the other options are incorrect:
- The term “factory costing” in the other choices is vague and not a recognized, separate overhead allocation method in standard managerial accounting. Options 2–4 either omit one of the three recognized methods or substitute the unclear term for it.

Conclusion: The correct choice is “single plantwide rate, multiple production department rates, and activity-based costing methods,” which matches the provided answer.

Which of the following are actual factory overhead allocation methods?单项选择题

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