The predetermined overhead rate is based on the relationship between
A) estimated annual costs and actual activity.
B) estimated annual costs and expected annual activity.
C) actual monthly costs and actual annual activity.
D) estimated monthly costs and actual monthly activity.

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated as estimated annual overhead costs divided by expected annual activity levels (usually measured in machine hours, labor hours, or units produced). This rate is then used to allocate overhead costs to products or services based on their usage of the activity level. Therefore, the predetermined overhead rate is based on the relationship between estimated annual costs and expected annual activity.

The Predetermined Overhead Rate Is Based on the Relationship Between