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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Discuss how the predetermined factory overhead rate can be used in job order cost accounting to assist management in pricing jobs.

To determine

Predetermined factory overhead rate

Normally, factory overhead costs are applied or allocated to cost of job based on predetermined factory overhead rate. The formula to calculate the predetermined factory overhead rate is as follows:

Predetermined factory overhead rate = Estimated total factory overhead costsEstimated activity rate

To discuss: in assisting management in pricing jobs using predetermined factory overhead rate

Explanation

The predetermined factory overhead rate is calculated using estimated amounts at the beginning of the period. The main reason is that managers are in need of timely information on the product costs of each job...

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