In Applying Costs Using a Predetermined Overhead Rate, the Most

question 88

Multiple Choice

In applying costs using a predetermined overhead rate, the most common allocation base is generally

• A)direct labour hours.
• B)direct materials used.
• C)indirect labour hours.
• D)indirect materials used.

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Definitions:

Economic Profits

The profit a firm makes after deducting both its explicit and implicit costs, reflecting the total opportunity costs of all resources used.

Yearly Return

The total gain or loss on an investment over a one-year period, expressed as a percentage of the investment's initial value.

Variable Costs

Expenditures that adjust in relation to the level of production.

Fixed Costs

Costs that do not vary with the level of output produced by a firm, such as rent, salaries, and insurance premiums.