A predetermined overhead application rate:
A)Expresses an expected relationship between overhead costs and an activity base.
B)Can be determined by dividing budgeted direct labor cost by the budgeted factory overhead costs.
C)Is computed at the end of the period once actual overhead costs are known.
D)Applies the same amount of overhead to each product or service.

Question

Quizplus · Accepted Answer

A predetermined overhead application rate is calculated to estimate the overhead costs associated with a particular activity base, such as machine hours or labor hours, before the period begins. It helps in assigning overhead costs to products or services based on their expected use of those activities.

A Predetermined Overhead Application Rate