Which of the following statements is true? When calculating the predetermined ov
ID: 2576682 • Letter: W
Question
Which of the following statements is true?
When calculating the predetermined overhead rate, estimated amounts are used for the total manufacturing overhead costs and total amount of the allocation base used in the numerator and denominator.
The predetermined overhead rate is calculated based on actual amounts of manufacturing overhead cost and allocation base.
Allocation is used to assign direct product costs to all manufactured products.
Predetermined overhead rates are calculated at the end of each annual accounting period.
When calculating the predetermined overhead rate, estimated amounts are used for the total manufacturing overhead costs and total amount of the allocation base used in the numerator and denominator.
The predetermined overhead rate is calculated based on actual amounts of manufacturing overhead cost and allocation base.
Allocation is used to assign direct product costs to all manufactured products.
Predetermined overhead rates are calculated at the end of each annual accounting period.
Explanation / Answer
Predetermined Overhead rate is calculated based on the estimated amounts of manufacturing overhead cost and allocation base. Hence second option is not true.
Allocation is used to assign the indirect product costs to all manufactured products. Hence, the third option is not true.
Predetermined overhead rates are usually calculated at the beginning of the accounting period. Hence, the fourth option is not true.
Correct option is first option.
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