Question

Managers use a predetermined overhead rate for which of the following reasons?

1) To allocate overhead costs to products or services
2) To determine the actual overhead costs incurred
3) To calculate the predetermined overhead rate
4) To track the usage of direct materials

Answer 1

Managers use a predetermined overhead rate to allocate overhead costs to products or services.

Step-by-step explanation:

Managers use a predetermined overhead rate for allocating overhead costs to products or services. The predetermined overhead rate is calculated by dividing the estimated total overhead costs by the estimated amount of the allocation base. This rate is then used to allocate the overhead costs to different products or services based on their usage of the allocation base.