Question

The fact that one department may be labor intensive while another department is machine intensive explains in part why multiple predetermined overhead rates are often used in larger companies.
1. True
2. False

Answer 1

Answer:

That statement is true

Explanation:

Pre-determined overhead is the method of overhead calculation that being done at the beginning of each accounting period. They use the number based on estimation from the performance on the previous period.

Determining pre-determined overhead of a machine is far easier compared to human labor since machine tend to give stable performance.

Since larger companies tend to use more machines than smaller companies, pre-determined overhad is more common among larger companies and rarely found in smaller ones.