In a process costing system,factory overhead costs are allocated to production departments by using a predetermined overhead allocation rate.

Process Costing System

An accounting method used where goods are produced in a continuous process, costs are averaged over all units to calculate unit costs.

Factory Overhead Costs

Indirect costs incurred during the manufacturing process, not including the costs of direct labor and materials.

Predetermined Overhead Allocation Rate

A rate used to apply manufacturing overhead to products or job orders, calculated based on estimated overhead costs and activity levels before production begins.