How Do You Calculate the Predetermined Manufacturing Overhead Rate Used

question 285

Multiple Choice

How do you calculate the predetermined manufacturing overhead rate used to allocate manufacturing overhead costs?

• A)By multiplying the total estimated manufacturing overhead costs by the total estimated amount of the allocation base
• B)By dividing the total estimated amount of the allocation base by the total estimated manufacturing overhead costs
• C)By dividing the total estimated manufacturing overhead costs by the total actual amount of the allocation base
• D)By dividing the total estimated manufacturing overhead costs by the total estimated amount of the allocation base

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Definitions:

Net Realizable Value

The estimated selling price in the ordinary course of business, minus the estimated costs of completion and the costs necessary to make the sale.

Bad Debt Expense

A provision for accounts receivable that are considered unlikely to be collected.

Percentage of Credit Sales

An accounting method used to estimate bad debts expense by applying a fixed percentage to the total credit sales of a period.

Allowance Account

An accounting reserve established to adjust the carrying value of accounts receivable to their net realizable value, recognizing potential losses from uncollectible accounts.