alleryStart learning →A predetermined overhead rate divides estimated manufacturing overhead by the estimated:
AActivity base
BDividend rate
CSelling price
DTax deduction
Answer & Solution
Correct answer: A. Activity base
1. The rate is fixed before the period starts, so both figures are estimates.
2. A predetermined overhead rate is calculated at the start of the accounting period.
3. It divides the estimated manufacturing overhead by the estimated activity base.
4. So the denominator is the activity base.
_Source: OpenStax Principles of Accounting Volume 2, Managerial Accounting (CC BY-NC-SA 4.0), Ch 6 'Activity-Based, Variable, and Absorption Costing', sections 6.1-6.5_
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