In traditional accounting methods,predetermined overhead rates are based on
A) machine hours.
B) utilities consumed.
C) direct labor hours or direct labor costs.
D) depreciable lives of machinery and equipment.

Question

Quizplus · Accepted Answer

Predetermined overhead rates are typically based on either direct labor hours or direct labor costs. This is because overhead costs are often caused by the amount of time or resources spent on direct labor activities. It allows companies to allocate overhead costs to products based on a reasonable estimate of the resources used by each product. Using machine hours or depreciable lives of machinery and equipment may not accurately reflect overhead costs and can lead to inaccurate product costing. Utilities consumed may be a factor in overhead cost calculations, but it is not typically the primary basis for determining a predetermined overhead rate.

In Traditional Accounting Methods,predetermined Overhead Rates Are Based on