Which of the following is TRUE about allocating overhead using a volume-based ov

Question

Which of the following is TRUE about allocating overhead using a volume-based overhead rate? You need to know the budgeted overhead and budgeted cost driver to compute the predetermined overhead rate. You need to know the budgeted overhead and actual cost driver to compute the predetermined overhead rate. You need to know the actual overhead and budgeted cost driver to compute the predetermined overhead rate. You need to know the actual overhead and actual cost driver to compute the predetermined overhead rate. O D

Explanation / Answer

One needs to know the budgeted overhead and the actual cost driver because overhead can be budgeted i.e. an estimate can be made that can be facilitated by actual cost driver.

Rest of the options is incorrect as exact overhead cannot be calculated so C and D are wrong, also we need to know the actual cost driver hence option A is wrong.

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