Which Idea About LAO and MSO Is True

question 32

Multiple Choice

Which idea about LAO and MSO is true?

• A)The LAO is relatively difficult to find.
• B)The MSO is easily calculable.
• C)Reversing opinion on the MSO during negotiations is acceptable.
• D)The LAO should be set to prevent a loss.

---

Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead to individual products or job orders, based on a related activity (e.g., machine hours or labor hours).

Predetermined Overhead Rate

A predetermined rate for allocating manufacturing overhead to products or job orders, established prior to the period by forecasting both overhead expenses and activity volumes.

Machine-Hours

An indicator of how much is produced or the level of activity, determined by the total hours machines run during the manufacturing process.

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to allocate overhead costs to products or job orders based on a specific activity base such as direct labor hours or machine hours.