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jenanawi
Feb 7, 2009, 03:16 PM
Hai all,
I want to know, why firms use a predetermined overhead rate to alocate the overhead to a job or a product? Just for my knowledge only.
Thanks

hamzashakaa
Feb 8, 2009, 02:24 AM
Because managers want to know the total cost of the job before the end of the accounting period. The use of such a rate enables an enterprise to determine the approximate total cost of each job when completed. If we don't use a predetermined OH rate we have to wait until the end of the period to know the actual cost of jobs. Moreover, POH rate is used to smooth seasonal variations in production

Cynthia514
Feb 10, 2009, 12:37 PM
Actually, this pre-determined rate is based on the experienced that the company has in the past.

DanyelJones
Jun 13, 2010, 07:44 AM
What effect would change the predetermined overhead rate have on the company’s inventory values?

hassanrkein
Mar 27, 2011, 06:42 PM
To enable managers, to record production during the period,
To be able to monitor profitability and also to set prices,
And to facilitate performance evaluation.