Factory overhead costs can be allocated by a process cost accounting system to the output of production departments by using a predetermined overhead allocation rate.

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Quizplus · Accepted Answer

This statement is true. Factory overhead costs can be allocated by a process cost accounting system to the output of production departments using a predetermined overhead allocation rate, which is calculated by dividing the estimated or actual total overhead costs by the estimated or actual total amount of allocation base (such as direct labor hours or machine hours). This rate is then used to apply overhead costs to each unit of output produced by the departments, based on the actual amount of allocation base used by each unit.

Factory Overhead Costs Can Be Allocated by a Process Cost