Why would a manufacturing company with multiple production departments still prefer to use a single plantwide overhead rate?
Claudia Pena
September 14, 2023
BUS202
Week 4 Discussion
Be sure that you are putting some thought into your discussion 150-200 words within the 4 questions.
Please also reply to 2 other students with 50-100 words. When you reply, please ensure you acknowledge their post, write about something that relates to their post, and ask an open-ended question.
1.
Why would management be concerned about the accuracy of product costs?
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2.
Why would a manufacturing company with multiple production departments still prefer to use a single plantwide overhead rate?
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3.
How do the multiple production department and the single plantwide factory overhead rate methods differ?
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4.
Why is it important to build rapport with the Department Managers if you were an Account Manager in your company/organization?
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Reply to the next2 posts from your classmates:
Damian:
1.) The reason as to why management would be concerned about product cost accuracy is because the overall accuracy of a product’s cost is important for more informed decision-making, general financial stability, and comprehensive business success. Management needs this kind of information to make overall strategic and operational decisions that can affect a business’s profitability, competitiveness, and long-term sustainability. What I am trying to say that there are a lot of factors that management should be concerned about, mainly their overall budgeting as this is the catalyst for all other allocations are to be derived from.
2.) As to why a manufacturing company with multiple production departments would still prefer the Single Plantwide Rate Method mainly because of its simplicity, the ability to save on certain costs, and general convenience, especially when a business’s production departments have similar patterns and overall consistency in their overhead costs. However, it is equally important to note that this method may lack precision in the cost allocation process. So, while this kind of method can be good in simplification, it is because of this that it may not be used by everyone.
3.) The primary way that Multiple Production Department and Single Plantwide Factory Overhead Rate Methods are different is how they allocate their Overhead costs. A Single Plantwide Method relies more on less accurate allocation as it only uses one single rate for its entire factory, thus simplifying allocation costs altogether. Whereas the Multiple Production Department Method is more complex and precise with its allocation as the given allocation depends on various factors like specific department characteristics and so on. Thus, there is a separate rate per department.
4.) It is vital to build strong bonds with your Department Managers if you were an Account Manager simply because it allows us as the Account Manager to understand a Department Manager’s needs, leading to a fostering of trust and general communication, which then, in turn, allows us to gain their overall support, thus ultimately driving a business towards success because of the enhanced collaboration and the overall competitiveness of the organization. Eventually, it makes our job remotely easier because it becomes easier to identify specific opportunities among departments for cross-selling and upselling.
Response (50-100 words):
Mariela:
1. Management may be concerned about the accuracy of product costs for a variety of reasons. Some of the reasons may include things like budgeting, cost control, investment decisions, and risk management. Knowing the accuracy of product costs helps management make informed decisions about products and selling prices.
2. A manufacturing company with multiple production departments would prefer using a single plant-wide overhead rate because of how simple and inexpensive it is. Using a single plant-wide overhead rate can help a company save money because they would not have to calculate and manage each department’s rate, making it both cost and time efficient.
3. The major difference between the multiple production department and the single plant wide factory overhead rate methods is that one uses a single rate while the other does not. In multiple production department overhead rate method, different rates are set for different/each production department in order to allocate the factory overhead costs to products. On the other hand, the single plant wide factory overhead rate method uses only one rate to allocate these costs.
4. I believe that it is important to build rapport with the department managers because it leads to effective communication and decision-making. It allows both the department and account managers to manage a company/organization successfully.
