IX. Overhead costs are allocated in four steps. A. Step 1: _____________ the ove

Question

IX.     Overhead costs are allocated in four steps.

A.     Step 1: _____________ the overhead rate.  

1.      A ________________ overhead rate is calculated as estimated overhead costs divided by estimated cost driver activity.

B.     Step 2: ______________ the overhead rate.

1.      Costs are assigned by multiplying the actual cost _____________ activity by the predetermined overhead rate.

C.     Step 3: Record ________________ overhead costs

D.     Step 4: _________________ applied and actual overhead amounts

1.      If over- or underapplied amounts are minimal, credit or debit _________________.

2.      If over- or underapplied amounts are material, adjustments should be made to the inventory accounts affected.

X.     The __________________ approach to applying overhead costs is to use a single plantwide rate.

XI.     The more accurate _____________________ approach to applying overhead costs creates many smaller activity pools and establishes separate rates for each pool.

Explanation / Answer

IX.     Overhead costs are allocated in four steps. A.     Step 1:Planning the overhead rate. 1.      A Predetermined overhead rate is calculated as estimated overhead costs divided by estimated cost driver activity. B.     Step 2: Applying the overhead rate. 1.      Costs are assigned by multiplying the actual cost driver activity by the predetermined overhead rate. C.     Step 3: Record Actual verhead costs D.     Step 4: Reconcilling applied and actual overhead amounts 1.      If over- or underapplied amounts are minimal, credit or debit Cost of goods sold 2.      If over- or underapplied amounts are material, adjustments should be made to the inventory accounts affected. X.     TheTraditional approach to applying overhead costs is to use a single plantwide rate. XI.     The more accurate ABC approach to applying overhead costs creates many smaller activity pools and establishes separate rates for each pool.

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