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It allows you to forecast future costs needed to do business.

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Q: How is predetermined overhead rates useful in costing?
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Related questions

What is the difference between absorption costing and direct costing?

Under absorption costing overheads are allocated to production based on predetermined overhead rates like machine hours, or direct labor hours etc while in direct costing overheads are allocated based on activity performed and relationship with production units.


What are the advantages of using predetermined overhead rates?

The benefits of using predetermined overhead rates is that budgeting and allocation of cash flows become easier. It also helps the firm to conserve resources to stay within a budget.


What are the three overhead absorption rates?

As far as I know there is only an overhead absorption rate and a full absorption rate. The alternative being marginal costing. There are 3 methods of absorption costing. These being Activity, Time and Efficiency but I'm not sure what you are asking exactly.


Disadvantages of using predetermined overhead absorption rates?

One disadvantage to using a predetermine overhead absorption rate is the fact that the rate may be too much for any particular product. If this happens, then the price of the product will be too much.


What is the difference between Actual costing and normal costing?

actual costing uses actual indirect-cost rates normal costing uses budgeted indirect-cost rates


WHAT IS Fixed moh?

Fixed MOH stands for fixed manufacturing overhead. It includes overhead costs that do not vary with production levels, such as rent on the manufacturing facility or management salaries. Fixed MOH is allocated to products based on predetermined rates or cost drivers.


What are departmental overhead rates?

Departmental overhead rates are an expense assigned to products associated with a particular department. Overhead rates help businesses remain within the boundaries of a budget.


What is the role of a cost accountant in the business organization?

Cost accountants are responsible for establishing budgets for the organization. They also assign predetermined overhead rates for product, so that the business doesn't take a loss when they sell the product.


What is activity based costing?

Activity Based Costing(ABC) Is a more recent approach to product costing ,pioneered by Professor Kaplan and Cooper . ABC is an attempt to reflect more accuratly in product costs those activities wich influence the level of support overheads includes such items as Inspection, Dispatch, Production Planing , Set up, tooling and similar costs. ABC system uses many drivers as absorption bases. Because of this , it claims that the use of ABC and several cost driver rates produces more realistic product or service cost specialy when the support costs are high.


Discuss what has happened in recent industrial history to reduce the usefulness of direct labor as the primary basis for allocating overhead to products?

Advances in computerized systems, technological innovation, global competition, and automation have changed the manufacturing environment. The amount of direct labor used in many industries has greatly decreased, and total overhead costs resulting from depreciation on expensive equipment and machinery, utilities, repairs, and maintenance have significantly increased. When there is not a correlation between direct labor and overhead, it is inappropriate to use predetermined overhead rates based on direct labor.


Why are certificate of deposit interest rates so high?

Banks pay you a premium interest rates for leaving your money untoched for a predetermined amount of time.


It is better to use multiple overhead rates compared to single rate in overhead absorption Discuss statement?

hope u all can help me about this question