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Predetermined Overhead Rate Is Calculated by Dividing Actual Overhead Costs

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Predetermined overhead rate is calculated by dividing actual overhead costs by actual cost driver activity.


Definitions:

Working Capital

Current assets minus current liabilities, indicating the liquidity available to a business for day-to-day operations.

Closing Entry

An accounting transaction recorded at the end of an accounting period to transfer the balances of temporary accounts to permanent ones.

Capital

Refers to financial assets or the financial value of assets, such as funds held in deposit accounts and/or funds obtained from special financing sources.

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