# Blanket Rate vs Departmental Rate

## Blanket (Plant-wide / Factory-wide) Rate

A single overhead absorption rate for the entire factory.

$$\text{Blanket Rate} = \frac{\text{Total Overhead}}{\text{Total Base Quantity}}$$

Use when all products:

## Departmental Rate

A separate absorption rate for each production department, using the base appropriate to that department.

$$\text{Departmental Rate} = \frac{\text{Departmental Overhead}}{\text{Departmental Base Quantity}}$$

Use when products differ in the resources / time they consume across departments. More accurate (but costlier to operate).

## Quick comparison

	Blanket Rate	Departmental Rate
Number of rates	One for whole factory	One per department
Accuracy	Lower (only valid in uniform cases)	Higher
Best fit	Single product / uniform processing	Mixed products with different resource use

⚠️ Common exam mistakes

Using a single blanket rate when products consume departments unevenly — this distorts product costs. A departmental rate is required there.
Thinking blanket rate is always cheaper-and-good: it is only appropriate under uniform conditions (one product, or all products through all departments for the same time).

Reference:

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