Question

In a process cost system, manufacturing overhead is assigned to:

A. finished goods at the end of each accounting period
B. work in process account for each job as the job is completed
C. a work in process account for each product department on the basis of a pre-determined overhead rate
D. a work in process account for each production department as overhead cost are incurred

Answer 1

In a process cost system, manufacturing overhead is assigned to a work in process account for each product department on the basis of a pre-determined overhead rate.

Step-by-step explanation:

In a process cost system, manufacturing overhead is assigned to a work in process account for each product department on the basis of a pre-determined overhead rate.

This means that the manufacturing overhead costs are allocated to the specific product departments based on a predetermined rate, which is calculated by dividing the estimated overhead costs by the estimated activity base (such as direct labor hours or machine hours).

For example, if a company has two product departments, Department A and Department B, and the predetermined overhead rate is $10 per direct labor hour, and Department A uses 100 direct labor hours and Department B uses 200 direct labor hours, then the manufacturing overhead assigned to Department A would be $1,000 and the manufacturing overhead assigned to Department B would be $2,000.