The Standard Predetermined Overhead Rate Used in Setting the Standard

question 113

Multiple Choice

The standard predetermined overhead rate used in setting the standard overhead cost is determined by dividing

• A) budgeted overhead costs by an expected standard activity index.
• B) actual overhead costs by an expected standard activity index.
• C) budgeted overhead costs by actual activity.
• D) actual overhead costs by actual activity.

---

Definitions:

Average Rate

A mean value calculated to represent the typical rate of something, such as interest, return, or speed, over a given period.

Fixed Asset

Long-term tangible property that a firm owns and uses in its operations to generate income, such as buildings and machinery.

Useful Life

The estimated period over which an asset is expected to be usable by an organization, after which it is considered to be no longer useful for business operations.

Residual Value

The estimated worth or salvage value of an asset at the end of its useful life.