Chapter 20, Problem 17Q

To determine

Predetermined Manufacturing Overhead:

Predetermined manufacturing overhead rate is the rate that has been worked out at the time of laying out the budget and the manufacturing overhead is applied using this rate. The predetermined rate and the activity uses is a source document used to assign the manufacturing overhead cost to each job.

The predetermined rate is applied to the activity used. Suppose the manufacturing overhead is applied on machine hours the machine hours used for the particular job is multiplied by predetermined rate and this will be the amount assigned to that particular job.

To define: The terms under-and over applied manufacturing overhead and indicate the balance in the manufacturing overhead account applicable to each term.