Which of the following is not true regarding predetermined overhead rates?
A) They are useful in estimating product costs before actual overhead amounts are known with certainty.
B) They can normalize seasonal and random fluctuations in overhead costs so that product costs will be consistent throughout the year.
C) With their use, it is no longer necessary to be able to identify a cost driver.
D) With their use, too much or too little overhead may end up being allocated to a product or job.

Question

Quizplus · Accepted Answer

Predetermined overhead rates require the identification of a cost driver to establish the overhead allocation. Therefore, Option C is incorrect. Options A, B, and D are all true statements.

Which of the Following Is Not True Regarding Predetermined Overhead