The Amount of Overhead Applied to Jobs Using a Predetermined

question 40

Multiple Choice

The amount of overhead applied to jobs using a predetermined (budgeted) rate is rarely equal to the actual cost of overhead incurred for a period. Which of the following is not a valid explanation for this?

• A) Actual spending for overhead is not equal to budgeted spending for overhead.
• B) Actual use of the overhead allocation base is not equal to the budgeted use of the allocation base.
• C) Budget estimates of overhead were unrealistically low.
• D) Direct costs were unexpectedly high.

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