Manufacturers Follow Four Steps to Implement a Manufacturing Overhead Allocation

question 103

Multiple Choice

Manufacturers follow four steps to implement a manufacturing overhead allocation system. Which step is not performed before the year begins?

• A)Allocate some manufacturing overhead to each individual job.
• B)Select an allocation base and estimate the total amount that will be used during the year.
• C)Estimate total manufacturing overhead costs for the coming year.
• D)Calculate a predetermined manufacturing overhead rate.

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Definitions:

Credit Balance

A credit balance occurs when the total credits in an account exceed the total debits, indicating the amount owed to the account holder or in the case of financial statements, to the creditor.

Factoring

A financial transaction where a business sells its accounts receivable to a third party (factor) at a discount to get immediate cash.

Nontrade Receivables

Amounts owed to a business that are not related to the sale of goods or services, such as tax refunds, advances to employees, or insurance claims.

Company Officers

Executives appointed by the board of directors responsible for managing the day-to-day operations and making major corporate decisions.