If the Allocation Base in the Predetermined Overhead Rate Does

question 379

True/False

If the allocation base in the predetermined overhead rate does not drive overhead costs, it will nevertheless provide reasonably accurate unit product costs because of the averaging process.

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Definitions:

Fundamental Benefit

A primary or essential advantage that is intrinsic to a product, service, or activity.

ACP

Average Collection Period (ACP) is a financial metric that measures the average number of days it takes for a company to collect payments from its customers after a sale has been made.

Bad Debts

Accounts receivable that a company does not expect to collect and writes off as a loss.

Credit Policy

The guidelines a company follows to determine the creditworthiness of its customers and the terms and conditions of credit it will extend to them.