Question

When applying manufacturing overhead to jobs, the formula to calculate the amount is as follows: A. Predetermined overhead rate divided by the actual manufacturing overhead incurred on the particular job. B. Predetermined overhead rate times the actual manufacturing overhead incurred on the particular job. C. Predetermined overhead rate divided by the actual units of allocation base charged to the particular job. D. Predetermined overhead rate times the actual units of allocation base charged to the particular job.

Answer 1

Answer:

The correct answer is option D.

Explanation:

Manufacturing overhead is a product cost and thus must be included in the cost sheet. Though it is difficult to include as it is an indirect cost. So even when the output level gets reduced due to some reason, the overhead cost remains constant.  

So, it is difficult to assign overhead costs to production. But it can be done by using an allocation process. In this process an allocation base is selected which is common to all products and services of company.