The Predetermined Overhead Rate Is Calculated As

question 64

Multiple Choice

The predetermined overhead rate is calculated as:

• A)Estimated Overhead Costs * Estimated Cost Driver Activity.
• B)Estimated Overhead Costs / Estimated Cost Driver Activity.
• C)Estimated Overhead Costs - Estimated Cost Driver Activity.
• D)Estimated Overhead Costs + Estimated Cost Driver Activity.
• E)None of the answer choices is correct.

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Definitions:

Contract Loss

A financial loss encountered in a contract when the total costs exceed the revenue earned from the contract, typically recognized in construction or long-term projects.

Percentage-of-Completion Method

An accounting method used to recognize revenue and expenses of long-term contracts in proportion to the work completed.

Estimated Revenues

Projections of the amount of money a business expects to receive from its activities or sales within a specific period.

Cost-to-Cost Method

A method used in accounting for long-term contracts where revenue is recognized based on the percentage of project completion, estimated by comparing the costs incurred to the total expected costs.