Question

1a) In applying costs using a predetermined overhead rate, the most common allocation base is generally

	a.	indirect materials used.
	b.	indirect labour hours.
	c.	direct labour hours.
	d.	direct materials used.

1b) Which one of the following is used to calculate the predetermined overhead rate?

	a.	applied overhead costs
	b.	predetermined overhead costs
	c.	actual overhead costs
	d.	estimated overhead costs

Answer 1

QUESTION : [1 a] IN APPLYING COSTS USING A PREDETERMINED OVERHEAD RATE, THE MOST COMMON ALLOCATION BASE IS GENERALLY ?

ANS : (C) DIRECT LABOUR HOURS

Predetermined overhead rate is an allocation rate, which is used to apply the estimated cost of manufacturing overhead to cost objects. Typically , direct labour cost, direct labour hours, machine hours or prime cost are used as an allocation base for the calculation of predetermined overhead rate.

QUESTION :[1b] WHICH ONE OF THE FOLLOWING IS USED TO CALCULATE THE PREDETERMINED OVERHEAD RATE ?

ANS : (d) ESTIMATED OVERHEAD COSTS

Predetermined overhead rate is the ratio of estimated overhead costs and the estimated units to be allocated .

predetermined overhead rate = estimated overhead costs / estimated total units in the allocation base