Question

1. Describe equivalent units and what they are used for?

2. Describe what a predetermined overhead rate is, how it is calculated and what it is used for?

Answer 1

solution:

1.

equivalent units:

In cost accounting,equivalent units are the units in production multiplied by the percentage of those units that are complete (100 percent) or those that are in process. That covers everything. If aunit is completed and transferred out, it's 100 percent complete.

uses:

Equivalent units of production. Equivalent units of production is a term applied to the work-in-process inventory at the end of an accounting period Equivalent units is a cost accounting concept that is used in process costing for cost calculations

2.

Foreordained Overhaed rate is a rate which is utilized to allot the different overhead expense to an item, administration, office, and so on based on designation base. Overhead Cost essentially incorporate cost like lease, devaluation, circuitous material and work cost, and so on.. Designation Base can be machine hours, direct work hours.

. Predetermined Overhead rate = Estimated Overhead Cost / Estimated Allocation Base

Predetermined Overhead Rate has numerous preferences

- Calculation of benefit. Organizations benefit can be determined utilizing the foreordained rate as opposed to trusting that the real overhead will happen till the year's end.

- Different Predetermined Overhead rate can be utilized for various offices for control reason. For instance, fabricating overhead can be control utilizing machine hrs, Sales Department overhead expense can be kept an eye based on item sold, and so forth. So it very well may be utilized for control reason for different divisions inside an association.

thank you.