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What is the predetermined overhead rate (round if necessary)?

What is the predetermined overhead rate (round if necessary)?

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Answer #1

Predetermined overhead rate is the formula used to calculate manufacturing or production overhead at the beginning of the period. They are calculated on the basis of rational forecasts and estimates. Formula for the same can be derived by dividing overheads (manufacturing) by activity driver or base.

Formula for predetermined overhead rate is as followed :

Predetermined overhead rate = Estimated overhead cost / Estimated total units or Estimated total labour hours (or any other relevant base).

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