A Predetermined Overhead Application Rate

question 7

Multiple Choice

A predetermined overhead application rate:

• A)Expresses an expected relationship between overhead costs and an activity base.
• B)Can be determined by dividing budgeted direct labor cost by the budgeted factory overhead costs.
• C)Is computed at the end of the period once actual overhead costs are known.
• D)Applies the same amount of overhead to each product or service.

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Definitions:

Substitute Product

A product that can be used in place of another product, satisfying the same consumer needs or wants.

LRMC

Long-Run Marginal Cost, which refers to the additional cost of producing one more unit of a good or service when all inputs are variable in the long term.

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