Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

6. Internal Controls and Reporting Cash

Fraud and the Fraud Triangle

Financial Accounting

6. Internal Controls and Reporting Cash

Fraud and the Fraud Triangle

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Multiple Choice

What is a primary weakness of the departmental and plantwide overhead rate methods?

They require complex and expensive software to implement.

They are only applicable to service organizations, not manufacturing.

They may not accurately assign overhead costs to products that use resources differently.

They eliminate the need for any cost allocation.

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Verified step by step guidance

Understand the concept of overhead allocation: Overhead costs are indirect costs that cannot be directly traced to a specific product or service. Methods like departmental and plantwide overhead rates are used to allocate these costs to products or services.

Recognize the primary weakness: Both departmental and plantwide overhead rate methods often rely on a single cost driver (e.g., machine hours or labor hours) to allocate overhead costs. This can lead to inaccuracies when products or services use resources differently.

Consider the implications: If products consume overhead resources in varying proportions, using a single cost driver may result in over- or under-allocation of costs, which can distort product profitability and decision-making.

Compare with alternative methods: Activity-Based Costing (ABC) is an alternative method that uses multiple cost drivers to allocate overhead more accurately, addressing the weakness of departmental and plantwide methods.

Summarize the key point: The primary weakness of departmental and plantwide overhead rate methods is their inability to accurately assign overhead costs to products that use resources differently, which can lead to misrepresentation of costs and profitability.