Here you go, please let me know if you need any revisions! I truly apologize :(
Why do companies use a predetermined overhead rate rather than actual manufacturing
overhead costs to apply overhead to jobs?
Companies utilize a predetermined overhead rate so that they can determine before-hand
how well they are performing on the given tasks. If such methods are utilized regularly, seasonal
factors or the fluctuations will be thrown off in regards to the overhead rates (Garrison, R. H.,
Noreen, E. W., & Brewer, P. C., 2003). This method of predetermination also helps maintain the
records and allows them to remain in order.
Explain underapplied and overapplied overhead and tell about the adjustment that is made
at the end of the period.
When it pertains to the underapplied overhead, this is when the applied cost will be lesser
than the actual cost as opposed to the overapplied being the total opposite. In the overapplied
head, the cost will resume to be higher than what the actual cost is. Some dispositions to relate to
this information would be 1) Close to COGS. 2) they could allocate the funds between WIP, FG,
and COGS during the periods in which they can be applied (Garrison, R. H., Noreen, E. W., &
Brewer, P. C., 2003).
What is a plantwide overhead rate? Why are multiple overhead rates, rather than
plantwide rates used by some companies?
When it pertains to the plantwide overhead, it is a process in which is known as a single
predetermined overhead rate that would be utilized throughout the plant as a whole. However,
within the larger industries or companies, multip...