What are the two conditions that can distort the costs in a plantwide allocation system?

In a plantwide allocation system, costs can be distorted due to the unique characteristics of jobs or products and the varying nature of manufacturing overhead (MOH) incurred by different departments.

When different jobs or products utilize departments to varying extents, this can lead to a misrepresentation of the costs allocated to those jobs or products. If one job requires significantly more time or resources from a department than another, allocating costs based on a single plantwide rate could overstate or understate the actual cost associated with that job. This means that jobs that use more of a department's resources would not receive a fair share of the overhead costs, leading to a distortion.

Additionally, different departments may incur diverse amounts and types of MOH, which further complicates the accuracy of cost allocation. For example, one department may have higher indirect labor costs while another may have higher depreciation on equipment. If a single overhead rate is applied for all departments, it fails to account for these differences, resulting in inaccuracies in the estimated costs for jobs or products that rely heavily on specific departments.

Therefore, both of these conditions contribute to the potential distortion of costs in a plantwide allocation system, making the selection of the correct answer valid as both aspects are critical to understanding the limitations