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

If the predetermined overhead rate is based on the estimated level of activity for the current period, then products will be charged only for the capacity that they use and will not be charged for the capacity they don't use. True or False True False
Traditional overhead allocations result in which of the following situations? a. Overhead costs are assigned as period costs to manufacturing operations. b. High-volume products are assigned too much overhead, while low-volume products are assigned too little overhead. c. Low-volume products are assigned too much overhead, while high-volume products are assigned too little overhead. d. The resulting allocations cannot be used for financial reports.
Under variable costing, fixed manufacturing overhead is: a) expensed immediately when incurred. b) never expensed. c) applied directly to Finished-Goods Inventory. d) applied directly to Work-in-Process Inventory. e) treated in the same manner as variable manufacturing overhead.
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?
Under absorption costing, fixed manufacturing overhead costs are:A. are deferred in inventory when production exceeds sales.B. are always treated as period costs.C. are released from inventory when production exceeds sales.D. none of the above
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
It is possible for units in the beginning Work-in-Process Inventory to also be part of the ending Work-in-Process Inventory True or False True False Activity-based costing is based on the concept that products produce activities and activities produce resources. 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).

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