The rate established prior to the beginning of a period that uses estimated overhead and an allocation factor such as estimated direct labor,and that is used to assign overhead cost to jobs,is the:
A)Predetermined overhead rate.
B)Overhead variance rate.
C)Estimated labor cost rate.
D)Chargeable overhead rate.
E)Miscellaneous overhead rate.

Question

Quizplus · Accepted Answer

The predetermined overhead rate is established before the beginning of a period based on estimated overhead costs and an allocation factor such as estimated direct labor, and is used to apply overhead cost to jobs. It is calculated by dividing the estimated overhead costs by the estimated allocation base. Therefore, option A is the correct answer. The other options are not relevant to this concept.

The Rate Established Prior to the Beginning of a Period