The predetermined overhead rate is based on the relationship between
A)estimated annual costs and actual activity.
B)estimated annual costs and estimated 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 by dividing the estimated annual overhead costs by the estimated annual level of activity (such as machine hours or direct labor hours). This rate is then used to apply overhead to individual jobs or products based on their actual level of activity during the year. Therefore, option B is the correct answer.

The Predetermined Overhead Rate Is Based on the Relationship Between