Companies use a predetermined overhead rate rather than an actual overhead rate because Blank______.Multiple choice question.it is impossible to calculate an actual ratea predetermined rate is more accuratea predetermined rate is easier to calculate and applyan actual rate is not known until the end of the period
Question
Companies use a predetermined overhead rate rather than an actual overhead rate because Blank______.Multiple choice question.it is impossible to calculate an actual ratea predetermined rate is more accuratea predetermined rate is easier to calculate and applyan actual rate is not known until the end of the period
Solution
The correct answer is: an actual rate is not known until the end of the period.
This is because overhead costs can fluctuate throughout the year due to various factors such as changes in utility costs, material costs, and labor costs. Therefore, it is difficult to accurately determine the actual overhead rate until the end of the accounting period. To overcome this, companies use a predetermined overhead rate, which is calculated based on estimated overhead costs and activity levels at the beginning of the accounting period. This allows companies to apply overhead to products or job orders more consistently throughout the period.
Similar Questions
The predetermined overhead rate is calculated:Multiple choice question.during the accounting periodat the end of the accounting periodat the start of the accounting period
Multiple Choice QuestionThe standard overhead rate is computed separately for:Multiple choice question.product and period costsfixed and variable costsdirect and indirect costs
Fill in the Blank QuestionFill in the blank question.The overhead rate method uses a different overhead rate per production department.
A predetermined overhead application rate is established to apply manufacturing overhead to Blank______.Multiple choice question.finished goodsraw materialswork in processcost of goods sold
A predetermined overhead rate is used to:Multiple choice question.assign direct costs to units produced.assign indirect costs to units produced.assign selling expenses to units produced.keep track of actual overhead costs.
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