Michael & Co The Predetermined Overhead Rate Based on Units Produced Is (Rounded

question 64

Multiple Choice

Michael & Co.expects overhead costs of $60,000 per month and direct production costs of $24 per unit.The estimated production activity for the current accounting period is as follows: $\begin{array}{|l|l|l|l|l|}\hline & 1^{st} \text { Quarter } &2^{nd} \text { Quarter } & 3^{nd}\text { Quarter } &4^{th} \text { Quarter } \\\hline \text { Unats produced } & 11,500 & 9,000 & 8,250 & 11,250 \\\hline\end{array}$ The predetermined overhead rate based on units produced is (rounded to the nearest penny) is:

• A) $1.50 per unit.
• B) $2.67 per unit.
• C) $18.00 per unit.
• D) $42.00 per unit.

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Definitions:

Deferred Tax Asset

An accounting item that refers to a situation where a business has paid more taxes in advance than its current tax liability, or has carryover of losses that can be used to lower future tax payments.

Year-end Deferred Income Taxes

Taxes on income that is earned in one accounting period but not paid until another, resulting from timing differences between accounting recognition and the tax laws.

Net Operating Loss

A period when a company's allowable tax deductions exceed its taxable income, potentially reducing future taxable income.

Deferred Income Taxes

Taxes that are payable in a future period due to temporary differences between financial accounting and tax reporting.