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predetermined overhead allocation rate is the rate to do what?

predetermined overhead allocation rate is the rate to do what?

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Answer #1

Predetermined Overhead Allocation Rate is the rate at which Manufacturing Overheads are charged/allocated to cost units.

As the name suggests, it is calculated in advance. So, it's calculated using the available estimates.

It is generally calculated by the formula,

(Estimated manufacturing overheads) /( Estimated Total machine hours.)

Here, machine hours is called allocation base. Direct Materials, Direct labor hours are also used as allocation bases.

(Please let me know if you need further help. Kindly rate positive if you found it helpful)

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