Question

O the amount of man 5 pts Question 27 Which of the following is NOT a reason for companies to assign costs to products or services? O to help determine pricing O to determine the best supplier of raw materials to help understand profitability to help value inventory Question 28 5pt Why would a company use a predetermined overhead rate rather than an actual overhead rate? O an actual overhead rate is not known until the end of the accounting period the predetermined rate is easier the predetermined rate is always more accurate O it is impossible to ever calculate an actual rate Question 29 5 Which of the following is true regarding a contribution approach income statement?

Answer 1

Solution to Question No. 27:

Correct option is (b)

​​​​​​Reason:

Companies do not assign costs to products or services to determine the best suppliers of raw materials. Instead, companies assign costs to products or services as these provide information for decision making purpose. By assigning costs to products or services one can determine pricing of products keeping in mind their minimum profitability requirements. Assigning costs to products and services also helps in understanding the profitability from products and services as well as it also helps in inventory valuation.

​Solution to Question No. 28:

Correct option is (a)

Reason:

Predetermined overhead rates are used rather than Actual overhead rates because actual overhead rates cannot be determined in advance before the end of the period. So, it is not possible to calculate actual overhead rates until the end of the period Therefore, organisations uses Predetermined overhead rates estimated at the start of an accounting period.