Please help answer the following accounting question.
How often should the predetermined overhead rate be reviewed by management for accuracy - monthly, quarterly or annually? Explain.© BrainMass Inc. brainmass.com June 4, 2020, 1:04 am ad1c9bdddf
Problem: How often should the predetermined overhead rate be reviewed by management for accuracy - monthly, quarterly or annually?
Predetermined overhead rates should not be re-figured more often than annually. One of the purposes of a predetermined overhead rates is to "normalize" overhead rates throughout the fluctuations over a full year.
Fluctuations over the course of a year can happen from seasonal activity. The predetermined overhead rate, by using annual activity, rather than monthly or quarterly activity, spreads overhead to all units in the ...
The following discussion tells you why these rates should not be revised mid-year and gives examples of what might happen if you did. Your response is 347 words in everyday language suitable for novice. Calculations are included in the solution.