Which of the Following Is Not True Regarding Predetermined Overhead

question 51

Multiple Choice

Which of the following is not true regarding predetermined overhead rates?

• A) They are useful in estimating product costs before actual overhead amounts are known with certainty.
• B) They can normalise seasonal and random fluctuations in overhead costs so that product costs will be consistent throughout the year.
• C) With their use,it is no longer necessary to be able to identify a cost driver.
• D) With their use,too much or too little overhead may end up being allocated to a product or job.

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Definitions:

MC

Stands for Marginal Cost, which is the cost of producing one additional unit of a good or service.

ATC

Average Total Cost, which is the total cost per unit of output incurred when producing goods or services. It includes both fixed and variable costs.

MR

An abbreviation for Marginal Revenue, which is the additional income from selling one more unit of a good or service.

Long-Run Equilibrium

A situation in a market where supply equals demand, and all factors of production - including labor and capital - are fully utilized, leading to stable prices.