Question

Manufacturing overhead is applied to each job A. at the time when the overhead cost is incurred. B. only if the overhead costs can be directly traced to that job. C. by means of a predetermined overhead rate. D. at the end of the year when actual costs are known.

Answer 1

Answer:

C.

Explanation:

The sistem of assigning manufacturing overhead to jobs, is based on the fact that actual overhead costs are accumulated in the manufacturing overhead account.

The overhead costs are essential to production. They must be assigned to determine full cost.

To do this, first the calculation of overhead allocation rate must be done. It is important to identify the allocation base, is the primary cost driving like direct labor hours, direct labor cost or machine hours.

After that, the rate must be multiplied by the actual quantity of allocation base used on the job. The application rate is multiplied by the actual quantity of allocation base used on the job.  For example, if the rate is based on direct labor hours, rate is multiplied by the direct labor hours used on each job.

The formula is:

MOR=MOC/MOAB

Predetermined manufacturing overhead rate (MOR)

Total estimated manufacturing overhead costs (MOC)

Total estimated quantity of the manufacturing overhead allocation base (MOAB)