If the Company Bases Its Predetermined Overhead Rate on Capacity

question 7

Multiple Choice

If the company bases its predetermined overhead rate on capacity, the predetermined overhead rate is closest to:

• A)$53.30
• B)$49.77
• C)$42.84
• D)$47.27

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Definitions:

Weighted-Average Method

An inventory costing method that assigns a weighted average cost to each unit of inventory, based on the cost of goods available for sale and the number of units available.

Equivalent Units

Equivalent units are a concept in cost accounting used to assign costs to partially completed goods, converting them into the amount of finished goods units they represent.

Direct Materials Cost

The expenditure on raw materials that are directly involved in the production of a good or service.

Process Cost Summary

A report detailing the costs associated with each phase of the manufacturing process, showing material, labor, and overhead expenses.