If the predetermined overhead rate is based on the estimated level of activity for the current period, then products will be charged only for the capacity that they use and will not be charged for the capacity they don't use.

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated based on estimated levels of activity and overhead costs, not actual usage, meaning products are charged based on estimates, not solely on the capacity they use.

If the Predetermined Overhead Rate Is Based on the Estimated