Chapter 4, Problem 4.8Q

To determine

Concept introduction:

Predetermined overhead allocation:

Overhead costs are indirect manufacturing costs which are not directly traceable to each unit of the product. These costs are allocated to the products using the predetermined overhead allocation rate. The formula of predetermined overhead allocation rate is as follows:

  $\text{Predetermined overhead allocation rate = }\frac{\text{Estimated Manufacturing overhead Cost}}{\text{Allocation base}}$

To indicate: If the full allocation of overhead costs to jobs guarantees that a profit will be earned for the period.