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Finance & Accounting
Pages 4 (1004 words)
Name Instructor Course Date Term Paper, Finance and Accounting Multiple predetermined overhead rates versus a single predetermined overhead rate Predetermined overhead rates are rates that are used in the determination and application of manufacturing overheads in the inventory process…
This will then enable for the computation of the predetermined overhead rate through the division of the computed estimates of the total overhead manufacturing costs by total estimated activity base. The use of these predetermined overhead rates is preferred due to the fact that it enables for the managers to have an idea of the overall indirect costs of production that they are most likely going to incur without having to wait until the end of the production and reporting exercise. This means that through the calculation of these overhead rates it is possible to project and model better techniques of current and future operations management (Ryan 76). Predetermined overhead rates also give businesses the advantage of simpler reporting and record keeping exercises. A single predetermined overhead rate is one that is used in all the departments in an organization or company. This means that instead of calculating a separate rate for each and every department in the company it is calculated all in one summation. This single predetermined overhead rate is particularly adequate in the chance that the company’s departments are homogeneous in operations hence a way in which overhead costs of production jobs can be allocated. A multiple predetermined overhead rate is a system through which the product cost is estimated. ...
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