Question

Companies Assign Manufacturing Overhead To _________ ____ ___________ / Specific Jobs On Estimated Basis Through Use Of ______________ _____________ _____________

Answer 1

Companies assign manufacturing overhead to individual jobs using a predetermined overhead rate, and 'spreading the overhead' means distributing the fixed costs over an increasing number of units produced, thereby reducing the cost per unit.

Step-by-step explanation:

Companies assign manufacturing overhead to individual jobs on an estimated basis through the use of a predetermined overhead rate. This approach is necessary when the overhead consists of costs such as rent, utilities, or salaries—expenses that are not directly traceable to specific jobs. The predetermined overhead rate is typically calculated at the beginning of the year by dividing the estimated total manufacturing overhead cost by an allocation base (such as estimated total units produced or estimated total machine hours).

Considering that a common name for fixed cost is “overhead,” and if you divide a fixed cost by the quantity of output produced, you get the average fixed cost. For example, if the fixed cost is $1,000, the average fixed cost decreases as the quantity of output increases. Therefore, the average fixed cost curve would be a hyperbola that approaches zero as production volume increases—illustrating the concept of “spreading the overhead.” This concept refers to the idea that as more units are produced, the fixed cost is spread over more units, reducing the cost per unit and making the business more efficient.