How a plant-wide overhead rate

  1. Explain how a plant-wide overhead rate, using a unit-based driver, can produce distorted product costs. In your answer, identify two major factors that impair the ability of plant-wide rates to assign cost accurately.
  2. Describe two ways to reduce a complex ABC system. Of the two ways, which has the most merit?

Corner Stone Exercise 4.11 Page 188 (Complete all required 1, 2, 3 and 4)

  1. What was the predetermined overhead rate?
  2. What was the applied overhead for last year?
  3. Was overhead over- or underapplied, and by how much?
  4. What was the total cost per unit produced (carry your answer to four significant digits)?