The rate established prior to the beginning of a period that relates estimated overhead to an allocation factor such as estimated direct labor and that is used to assign overhead cost to jobs is the:
A) Predetermined overhead allocation 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 allocation rate is a rate established before the accounting period to assign overhead cost to jobs based on a chosen allocation factor such as estimated direct labor. This method is used to apply overhead costs consistently to all jobs based on an estimated factor.

The Rate Established Prior to the Beginning of a Period