ECONOMICS

Detailed explanation-1: -If a company uses a predetermined overhead rate, actual manufacturing overhead costs of a period will be recorded in the Manufacturing Overhead account and will be recorded on the job cost sheets. The journal entry for cost of goods manufactured includes the costs of units that are partially completed.

Detailed explanation-2: -If a company uses predetermined overhead rates, actual manufacturing overhead costs of a period will be recorded in the Manufacturing Overhead account, but they will not be recorded on the job cost sheets for the period.

Detailed explanation-3: -The use of predetermined overhead rates can help smooth fluctuations in actual overhead costs due to periodic variations (such as seasonal changes). This will ensure that product costs remain constant over the year.

Detailed explanation-4: -A predetermined overhead rate is calculated at the start of the accounting period by dividing the estimated manufacturing overhead by the estimated activity base. The predetermined overhead rate is then applied to production to facilitate determining a standard cost for a product.

Detailed explanation-5: -If the actual manufacturing overhead cost for a period exceeds the manufacturing overhead cost applied, then manufacturing overhead would be considered to be underapplied.