ACCY 211 – Week 5 Tut Questions

5.12

A company usually does not incur overhead costs uniformly throughout the year. Predetermined
rates make it possible for companies to estimate job costs sooner. Using a predetermined rate,
companies can assign overhead costs to production when they assign direct materials and direct
labour costs.

5.16

a) Advantages of calculating predetermined cost driver rates for the following year shortly before
the end of each financial year is that actuals are readily available and can be used as a reliable basis
for the budget. The predetermined rates allow management to predict, and assess the cost of jobs
on a timely basis

b) 500000/2200 = $227.27/hour

c) The use of predetermined cost drivers might cause under or over applied overhead which through
can be explained and accounted for at the end of the accounting period to ensure accuracy of
costing

5.18

1.

Actual Costing Normal Costing Variation of Normal

Costing
Direct Cost Rate $285000/11400 = $25 $25 $273000/10500 = $26
Indirect Cost Rate $159600/11400 = $14 $157500/10500 = $15 $15