The Predetermined Indirect Cost Allocation Rate Is Computed as

question 62

Multiple Choice

The predetermined indirect cost allocation rate is computed as

• A)total estimated indirect costs / total estimated amount of the allocation base.
• B)total amount of the allocation base / total estimated indirect costs.
• C)total estimated indirect costs + total estimated amount of the allocation base.
• D)total amount of the allocation base - total estimated indirect costs.

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Definitions:

Interest Payable

The amount of interest that has been incurred on borrowed funds that a company must pay, typically represented as a current liability on the balance sheet.

Effective Interest Method

An accounting technique used to allocate the interest expense of a bond evenly over its life, based on the bond's carrying value.

Premium Bond

A bond sold for more than its face value, where the bond's coupon rate is higher than the prevailing market rate of interest.

Interest Expense

The cost incurred by an entity for borrowed funds, typically reported on the income statement.