When Allocating Fixed Costs, a Predetermined Lump-Sum Allocation Based on Budgeted

question 117

True/False

When allocating fixed costs, a predetermined lump-sum allocation based on budgeted usage should be used.

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Definitions:

Departmental Predetermined Overhead Rates

Rates calculated in advance for each department, used to assign overhead costs based on estimated activity levels.

Machine-Hours

A measure of the total time that machines are operating, often used as a basis for allocating manufacturing overhead costs.

Markup

The amount added to the cost price of goods to cover overhead and profit, resulting in the selling price.

Selling Price

The amount of money charged to the customer for a product or service, determined by adding a margin to the cost price.