Final answer:
The claim that predetermined overhead rates can only be calculated at the end of the period is incorrect, as they are estimated at the beginning of the period to allow for more accurate product cost estimation and effective pricing and budgeting.
Step-by-step explanation:
The statement that predetermined overhead rates can only be calculated at the end of the period is false. Predetermined overhead rates are calculated at the beginning of the accounting period based on an estimate of total costs and an allocation base. This rate is then used to assign overhead costs to products or services as they are produced throughout the period. Calculating the rate in advance allows businesses to estimate their product costs more accurately during the period, rather than waiting until the end when actual overhead costs are known.
To calculate the predetermined overhead rate, a company estimates the total overhead costs for the coming period and divides it by an estimated allocation base, such as direct labor hours, machine hours, or any other cost driver that is linked to the production process. This makes the process of costing smoother and helps in setting prices and budgeting effectively. However, at the end of the period, the company will compare the actual overhead incurred with the allocated overhead to determine variances.