Using a departmental approach to overhead application results in as using a plantwide rate.

Using a departmental approach to overhead application results in as using a plantwide rate.

over-applied and under-applied overheads

Explanation:

There are three methods for overhead application.  One method is the use of a plantwide overhead rate, where the overhead costs are divided by the volume of plantwide consumption to obtain the rate per consumption.  Two is the departmental overhead rate which restricts the calculation of the overhead rate to the department, thereby making the rate specific to each department.  The third is the activity-based costing technique which assesses the level or volume of activity and uses this to determine the overhead rate.

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