Question

Why do companies use predetermined overhead rates rather than actual manufacturing overhaed costs to apply overhead to job?

Answer 1

to avoid delaying the product costing exercise.

Step-by-step explanation:

The actual overhead costs are usually not readily available when costing a product. Waiting for the actual costs would delay the product costing exercise, thus a company uses estimates (predetermined overhead rates) and later adjust for the over or under - application when actual information is available.