The amount of overhead applied to jobs using a predetermined (budgeted) rate is rarely equal to the actual cost of overhead incurred for a period. Which of the following is not a valid explanation for this?
A) Actual spending for overhead is not equal to budgeted spending for overhead.
B) Actual use of the overhead allocation base is not equal to the budgeted use of the allocation base.
C) Budget estimates of overhead were unrealistically low.
D) Direct costs were unexpectedly high.

Question

Quizplus · Accepted Answer

Direct costs have no direct impact on the overhead application rate and therefore cannot explain the difference between actual overhead costs and the predetermined rate.

The Amount of Overhead Applied to Jobs Using a Predetermined