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Unformatted text preview: 58.20 106.80 Price $446.20 $818.80 6. Should Sounds Fine, Inc. use plantwide or departmental overhead rates? Explain your answer. The management of Sounds Fine, Inc. should use department overhead rates. The overhead cost structures in the two production departments are quire different, and departmental rates more accurately assign overhead costs to products. When the company used a plantwide overhead rate, the Standard speakers were overcosted and the Deluxe speakers were undercosted. This in turn resulted in the Standard model being overpriced and the Deluxe model being underpriced. The cost and price distortion resulted from the following facts: (1) the Standard speakers spend most of their production time in Department II, which is the least costly of the two departments; and (2) the Deluxe speakers spend most of their production time in Department I, which is more costly than Department II....
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- Spring '12