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How do you calculate predetermined overhead rate

How do you calculate predetermined overhead rate

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Answer #1

Predetermined overhead rate is used to apply Manufacturing overhead to products or job orders and is usually computed at the beginning of each period. Commonly used allocation basis are direct labor hours, Machine hours,

The predetermined overhead rate is calculated by

i.e Predetermined overhead rate = Estimated Manufacturing overhead / Estimated activity base units

If Machine hours is considered as the allocation base then Predetermined overhead rate =

Estimated Manufacturing overhead / Total machine hours

If Direct labor hours is considered as the allocation base then predetermined overhead rate =

Estimated Manufacturing overhead / Total machine hours

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