Question

The predetermined indirect cost overhead rate is computed by:

a. Dividing actual overhead by the planned units of the cost driver.
b. Dividing actual overhead by the actual units of the cost driver.
c. Dividing actual overhead by the average units of the cost driver.
d. None of the above.

Answer 1

The predetermined indirect cost overhead rate is computed by dividing actual overhead by the planned units of the cost driver.

Step-by-step explanation:

The predetermined indirect cost overhead rate is computed by: a. Dividing actual overhead by the planned units of the cost driver. In this method, the overhead rate is predetermined before the actual overhead and units of the cost driver are known. It provides a basis for allocating indirect costs to products or services.