The Underallocation or Overallocation of Overhead Is a Direct Result

question 269

True/False

The underallocation or overallocation of overhead is a direct result of using a predetermined manufacturing overhead rate rather than the actual manufacturing overhead rate.

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Definitions:

Standards

Criteria or benchmarks used for measuring performance or quality in various fields, including manufacturing, auditing, and accounting.

Actual Information

Factual data or evidence that is true and accurate, without alteration or distortion.

Raw Materials Quantity Variance

The difference between the actual quantity of raw materials used in production and the estimated quantity expected to be used, measured in terms of cost.

Direct Materials Purchases Variance

This measures the difference between the actual cost of direct materials purchased and the expected (or standard) cost of those materials.