When all overhead is assigned using direct-labor hours, the company has chosen to use a(n) plantwide overhead rate.
This is further explained below.
What is overhead?
Generally, Overheads are expenses incurred by a company that are necessary for maintaining its regular operations. Overheads, in contrast to operational expenditures, are not allocated to individual cost centers or functional areas of a company.
As an alternative, they serve to bolster the company's primary revenue drivers.
In conclusion, The company has decided to use a(n) plantwide overhead rate whenever overhead costs are distributed proportionally across production based on the number of hours of direct labor expended.
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