Service firms develop a predetermined rate for some costs. This rate is called the

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The term "indirect cost allocation rate" refers to the predetermined rate that service firms develop to allocate indirect costs to their products or services. It is used to determine the indirect costs associated with producing each unit of output or delivering each unit of service. The other options are either too narrow (labor rate, hourly cost rate) or too general (direct cost rate) to accurately represent this concept.

Service Firms Develop a Predetermined Rate for Some Costs