The budgeted factory overhead rate is computed as ________.
A) actual factory overhead costs divided by actual production in units
B) actual factory overhead costs divided by actual cost driver activity
C) budgeted factory overhead costs divided by actual cost driver activity
D) budgeted factory overhead costs divided by budgeted cost-allocation base level

Question

Quizplus · Accepted Answer

The budgeted factory overhead rate is computed by dividing the budgeted factory overhead costs by the budgeted cost-allocation base level. This rate is then used to allocate overhead to production during the budgeted period. Option A is incorrect because it uses actual factory overhead costs, not budgeted. Option B is incorrect because it uses actual cost driver activity instead of budgeted. Option C is incorrect because it uses budgeted factory overhead costs, but actual cost driver activity.

The Budgeted Factory Overhead Rate Is Computed as ________