When Calculating the Predetermined Manufacturing Overhead Rates Using Direct Labour

question 69

True/False

When calculating the predetermined manufacturing overhead rates using direct labour hours as the cost driver the formula is 'total overhead divided by total direct labour hours'. This rate is applied to both the variable overhead and the fixed overhead.

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Definitions:

Subsidiary

A company that is completely or majority-owned by another company.

Fair Value

Fair value is the estimated price at which an asset or liability could be exchanged between knowledgeable, willing parties in an arm's length transaction.

Contingent Consideration

Future payment obligations in a business combination or other arrangements that depend on specific outcomes or achievements.

Goodwill

The intangible asset that arises when a company acquires another company for a price higher than the fair value of its net identifiable assets.