The two key items in determining the budgeted factory-overhead rate are budgeted total overhead and _____.
A)actual volume of the cost driver
B)actual factory-overhead costs
C)budgeted total volume of the cost driver
D)estimated factory-overhead costs

Question

Quizplus · Accepted Answer

The budgeted factory-overhead rate is calculated by dividing the budgeted total overhead by the budgeted total volume of the cost driver. This cost driver could be, for example, direct labor hours, machine hours, or units produced. Therefore, the actual volume of the cost driver (A) and actual factory-overhead costs (B) are not used in determining the budgeted factory-overhead rate. The estimated factory-overhead costs (D) may be used to determine the budgeted total overhead, but not the budgeted factory-overhead rate itself.

The Two Key Items in Determining the Budgeted Factory-Overhead Rate