Question

When computing the predetermined manufacturing overhead rate, which amount below is most likely used in the numerator?

	a.	applied manufacturing overhead costs
	b.	actual manufacturing overhead costs
	c.	estimated manufacturing overhead costs
	d.	direct labour hours

The denominator in a predetermined overhead rate is usually

	a.	estimated overhead costs.
	b.	estimated activity level.
	c.	actual activity level.
	d.	actual overhead costs.

At what point in time is the predetermined overhead rate calculated?

	a.	Once actual overhead costs are incurred.
	b.	At the end of the year in which the job is in production.
	c.	At the time each job is completed.
	d.	At the beginning of the year.

Which one of the following is a common activity base used to calculate the predetermined overhead rate?

	a.	Number of jobs completed.
	b.	Indirect labour costs.
	c.	Number of months to complete jobs.
	d.	Direct labour dollars.

Which one of the following is true of the CVP income statement?

	a.	It separates manufacturing from non-manufacturing costs.
	b.	It is used internally by management.
	c.	It provides the amount of gross profit of a company.
	d.	It is part of accounting information provided to all financial statement users.

Answer 1

The term predetermined manufacturing overhead rate itself suggests, it is an allocation rate for a job or a product at the starting point of the project in simple language it gives an approximate product cost to be manufactured, it can be obtained by dividing the estimated cost of manufacturing overhead by the approximate allocation based units.

Answers-

1)- C)- estimated manufacturing overhead cost

2)- B)- estimated activity level

3)- D)- at the beginning of the year

4)- D)- Direct labor cost

5)- B)- It is used internally by management.