Predetermined overhead rate is used because actual rate becomes available only:
ABefore period start
BAfter period close
COn each transaction
DDaily
Answer & Solution
Correct answer: B. After period close
1. Actual overhead figures are known only after all invoices are received and the period is closed.
2. To cost jobs promptly during the period, a predetermined rate computed in advance is used.
3. Differences are reconciled via under or over absorption at period end.
4. Hence the rationale: actual rate is available only after period close.
_Source: ICAI BoS Inter Paper 3, Ch 4 "Overheads", §4.5 ¶3_
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