Why do companies use predetermined overhead rates rather than actual manufacturing overhead costs to apply overhead to jobs? What factors should be considered in selecting an allocation base to be used in computing a predetermined overhead rate?
Most of the companies prefer to use predetermined overhead rates instead of the actual manufacturing overhead costs to apply overhead to jobs due to the following reasons:
-- The predetermined rate remains unchanged from month to month. When the volume of goods produced varies from month to month, there would be variation in the actual rate from month to month, even though the total cost remains unchanged from month to month.
-- Predetermined overhead rates helps in the simplification of the record keeping, thus make it possible for the organisations to estimate job costs sooner
-- The predetermined overhead rates take into consideration all the abnormal factors related to a specific job while the actual overhead rate does not take into consideration all the abnormal factors
Predetermined overhead rates are used for applying the overhead to jobs. For creating the rate, the cost drivers are used to assign overhead to jobs. Typically in computing a predetermined overhead rate use a measure of activity which is mostly based on; which means the labor hours vs. machine hours
Why do companies use predetermined overhead rates rather than actual manufacturing overhead costs to apply overhead...
Please answer ALL OF these questions or dont even attenpt it, thanks. 2-5 Explain the four-step process used to compute a predetermined overhead rate. 2-6 What is the purpose of the job cost sheet in a job-order costing system? 2-7 Explain why some production costs must be assigned to products through an allocation process. 2-8 Why do companies use predetermined overhead rates rather than actual manufacturing overhead costs to apply overhead to jobs? 2-9 What factors should be considered in...
please answer each one individually thanks 2-1 What is job-order costing? 2-2 What is absorption costing? 2-3 What is normal costing? 2-4 How is the unit product cost of a job calculated? 2-5 Explain the four-step process used to compute a predetermined overhead rate. 2-6 What is the purpose of the job cost sheet in a job-order costing system? 2-7 Explain why some production costs must be assigned to products through an allocation process. 2-8 Why do companies use predetermined...
What is the predetermined overhead rate, and why do companies use this calculation to apply manufacturing overhead? Write in simple words in one paragraph.
if anyone could answer both pictures (all questions) that would be icredibly amazing! But understandable if not, but if you cant do both please atleast do all the questions in one of the picture boxes (either all of 2-5-2-13 or all of 3-5 - 3-10) at the minimum. Thanks 2-5 Explain the four-step process used to compute a predetermined overhead rate. 2-6 What is the purpose of the job cost sheet in a job-order costing system? 2-7 Explain why some...
How do you calculate the predetermined manufacturing overhead rate used to allocate manufacturing overhead costs? A.By dividing the total estimated manufacturing overhead costs by the total estimated amount of the allocation base B.By dividing the total estimated amount of the allocation base by the total estimated manufacturing overhead costs C.By dividing the total estimated manufacturing overhead costs by the total actual amount of the allocation base D.By multiplying the total estimated manufacturing overhead costs by the total estimated amount of...
Why are predetermined overhead rates calculated and used to estimate manufacturing overhead instead of using actual overhead amounts?
Amberjack Company is trying to decide on an allocation base to use to assign manufacturing overhead to jobs. The company has always used direct labor hours to assign manufacturing overhead to products, but it is trying to decide whether it should use a different allocation base such as direct labor dollars or machine hours. Actual and estimated data for manufacturing overhead, direct labor cost, direct labor hours, and machine hours for the most recent fiscal year are summarized here Estimated...
T/F and Explain why Please 1) A cost driver is a factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes direct costs. 2) Job-order costing systems often use allocation bases that do not reflect how jobs actually use overhead resources. 3) An employee time ticket is an hour-by-hour summary of the employee's activities throughout the day. 4) The formula for computing the predetermined overhead rate is: Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated...
The options for the boxes are as followed: Actual overhead costs Actual qty of the allocated base used Estimated overhead costs Estimated of the qty allocated base used Woodall makes handheld calculators in two models: basic and professional. Woodall estimated $1,149,500 of manufacturing overhead and 605,000 machine hours for the year. The basic model actually consumed 280,000 machine hours, and the professional model consumed 325,000 machine hours. Requirements 1. Compute the predetermined overhead allocation rate using machine hours (MHr) as...
The options for the boxes are as followed: Actual overhead costs Actual qty of the allocated base used Estimated overhead costs Estimated of the qty allocated base used Woodall makes handheld calculators in two models: basic and professional. Woodall estimated $1,149,500 of manufacturing overhead and 605,000 machine hours for the year. The basic model actually consumed 280,000 machine hours, and the professional model consumed 325,000 machine hours. Requirements 1. Compute the predetermined overhead allocation rate using machine hours (MHr) as...