Which of the following is an advantage of developing a predetermined overhead application rate?
A)Long-run fluctuations in volume of output are eliminated.
B)In a job order system,unit costs can be determined only at the end of the period.
C)The overhead application rate facilitates assigning overhead costs to the ending inventory of work in process.
D)Actual overhead will always be less than applied overhead.

Question

Quizplus · Accepted Answer

Developing a predetermined overhead application rate facilitates assigning overhead costs to the ending inventory of work in process. This is because a predetermined overhead application rate is based on a forecast of the expected amount of overhead costs that will be incurred during the period, and this amount is then used to calculate the amount of overhead costs that should be assigned to each unit of production based on the actual amount of direct labor or machine hours used. By using this predetermined rate, the amount of overhead costs assigned to each unit of production remains constant regardless of the actual amount of overhead costs incurred during the period. This makes it easier to assign overhead costs to the ending inventory of work in process by simply multiplying the number of units in the inventory by the predetermined overhead application rate.

Which of the Following Is an Advantage of Developing a Predetermined