Why Do Many Managers Desire to Use a Predetermined Overhead

question 69

Multiple Choice

Why do many managers desire to use a predetermined overhead rate instead of an actual overhead rate?

• A) Because it is impossible to ever know actual overhead costs.
• B) Because predetermined overhead rates are more accurate than actual overhead rates.
• C) Because actual overhead amounts are often not known in a timely enough manner to make decisions.
• D) Because the use of predetermined overhead rates will always result in lower product prices.

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Definitions:

Equilibrium Quantity

The quantity of goods or services supplied is exactly equal to the quantity of goods or services demanded at the market equilibrium price.

Demand

The amount of a product or service that buyers are ready and able to buy at different prices over a specified time frame.

Supply

The total amount of a specific good or service available for purchase at any given time.

Wheat Farmer

An individual or entity engaged in the cultivation of wheat as a commercial agricultural activity.