3) Why do companies use a predeterminedoverhead rate to assign overhead to productsrather than using actual overhead costs?O Because actual overhead costs are paidsporadically, whereas products flowthrough the production process regularly.Because actual overhead costs areknown at the beginning of a period,whereas the predetermined overhead rateis not known until the end of the period.Because actual overhead costs are paidregularly, whereas products flow throughthe production process only sporadically.Because actual overhead costs areestimates, whereas predetermined rate isexact.

Why Other Options Are Wrong: "Because actual overhead costs are paid sporadically, whereas products…

Answered: 3) Why do companies use a predetermined…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 3MC: Which is not a step in analyzing the cost driver for manufacturing overhead? A. Identify the cost B....

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Similar questions

Manufacturing overhead is what is left after subtracting direct labor and direct material from total manufacturing costs. True or False True False
Question: In cost accounting, what is the primary purpose of calculating the predetermined overhead rate? A) To allocate indirect costs to products based on a predetermined formula.B) To determine the actual overhead costs incurred during a specific production period.C) To calculate variable costs associated with each unit of production.D) To assess fixed costs that remain constant regardless of production levels.
One of the disadvantages of the departmental and the plantwide overhead rate methods is that OA. technological advances may decrease the effect of direct labor hours as a percentage of total manufacturing costs. B. technological advances may increase direct labor hours as a percentage of total manufacturing costs. OC. direct labor hours may decrease the effect of technological advances. OD. direct labor hours may increase the effect of technological advances.
Why do businesses apply overhead to tasks using fixed rates rather than real manufacturing overhead costs?
Which of the following statements is incorrect regarding manufacturing overhead? Multiple Choice Manufacturing overhead includes both fixed and variable costs. Manufacturing overhead is an indirect cost to units or products. Actual overhead costs are used in the cost accounting process. Actual overhead costs tend to remain relatively constant over various output levels.
Please explain:: What is the purpose of an overhead rate What are the steps to apply the overhead cost to a product What does it represent when the overhead cost for over-applied
Under variable costing, fixed manufacturing overhead is expensed at the time the units are produced. Under absorption costing, fixed manufacturing overhead is expensed at the time the units are sold. True or False True False
Which of the following statements is true? a) Using either direct labor hours or direct labor costs to calculate a plantwide overhead rate will generally ensure that direct labor costs are accurately traced to jobs. b) An assumption that the only cost driver of an organization is direct labor hours is generally not accurate. c) A manufacturing overhead rate is only determined and used for fixed manufacturing overhead. d) Manufacturing overhead is directly traced to jobs using an overhead application rate(s).
f) ‘Process costing is a term used in cost accounting to describe one method for collecting and assigning manufacturing costs to the units produced.’ There are some statements about the process costing: An abnormal loss occurs when expected output exceeds actual output. The scrap value of an abnormal loss is credited to the process account. The allocated cost of an abnormal gain is credited to the process account. The inputs to a process less the normal loss is the expected output. The normal loss in a process is allocated a cost in order to reconcile the costs of inputs and outputs. The FIFO method assumes opening WIP is the first group of units to be completed. Therefore, opening WIP is charged separately to completed production and CPU is based on current period costs. Required: Please identify which of the above statements are false and explain the reasons.
f) 'Process costing is a term used in cost accounting to describe method for collecting and assigning one manufacturing costs to the units produced.' There are some statements about the process costing: 1. An abnormal loss occurs when expected output exceeds actual output. 2. The scrap value of an abnormal loss is credited to the process account. 3. The allocated cost of an abnormal gain is credited to the process account. 4. The inputs to a process less the normal loss is the expected output. 5. The normal loss in a process is allocated a cost in order to reconcile the costs of inputs and outputs. 6. The FIFO method assumes opening WIP is the first group of units to be completed. Therefore, opening WIP is charged separately to completed production and CPU is based on current period costs. Required: Please identify which of the above statements are false and explain the reasons.
Which of the following is not a reason to allocate overhead? Some overhead costs are seasonal and should be spread over production for the entire year. Unlike direct materials and direct labor, the amount of overhead actually incurred may not be known at the time a job is being worked on. Allocation is more accurate than tracing items directly to jobs. Manufacturing overhead is an indirect cost that cannot be physically or economically traced back to a specific item.
Determining the basis for applying manufacturing overhead costs involvesA. primarily the accumulation of direct labor hours since virtually all overhead costs are driven by direct labor hours.B. primarily the maintaining of accurate records of production volume since virtually all overhead costs are driven by the number of units produced.C. the determination of a measure of activity that is a causal factor in the incurrence of overhead cost.D. actual rather than budgeted levels of activity.

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