A predetermined indirect cost rate is calculated:
A) using budgeted costs.
B) monthly.
C) using actual costs.
D) using cash flow data.

Question

Quizplus · Accepted Answer

A predetermined indirect cost rate is calculated using budgeted costs. It is calculated by estimating the total indirect costs for a period and then dividing it by the estimated level of some cost driver, such as direct labor hours, machine hours, or material costs. This rate is then used to allocate indirect costs to individual products or services. Using budgeted costs allows for better planning and more accurate cost allocation.

A Predetermined Indirect Cost Rate Is Calculated