(Appendix 4B)If the predetermined overhead rate on is based on the level of activity at capacity, then products will be charged only for the capacity that they use and will not be charged for the capacity they don't use.

Question

Quizplus · Accepted Answer

When the predetermined overhead rate is based on the level of activity at capacity, it means that the rate was calculated based on the amount of overhead costs expected to be incurred at full capacity. Therefore, products will only be charged for the capacity they use, as the predetermined overhead rate only accounts for this level of activity. Any unused capacity will not be charged for since it is not included in the predetermined rate.

(Appendix 4B)If the Predetermined Overhead Rate on Is Based on the Level