What is predetermined cost give examples?

Answer 1

Predetermined costs are estimates of costs that are established in advance of a specific period, often used for budgeting and financial planning. For example, a company might set a predetermined overhead rate based on expected machine hours for the year, allowing it to allocate manufacturing overhead to products. Another example is a fixed salary for employees, which is established before the start of the fiscal year and does not change regardless of actual hours worked. These costs help organizations plan and control their financial resources effectively.