The Departmental overhead rates sometimes result in inaccurate product costs because it depends on multiple factors.
Departmental overhead costs are calculated on the idea of allocation base and estimated overhead charges. because the complexity of the procedure increases, the overhead value starts relying on a couple of elements. Allocation it on the premise on single base results in inaccurate allocation and hence a few products are over or under allocated.
Thus because the complexity of the manner increases, indirect cost begin depending on multiple elements due to which departmental overhead rate starts deviating from the actual one and hence the product costs as a result calculated are inaccurate.
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