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Subjects>Math>Math & Arithmetic

Definition of a predetermined overhead rate?

Anonymous

∙ 10y ago

Updated: 12/7/2022

Predetermined overhead rate is that overhead rate calculated before start of production to allocate overhead costs to units of products by using some ratio in relation to some other cost like material cost or labor cost or labor hours etc.

Wiki User

∙ 10y ago

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When is the Predetermined overhead rate usually calculated?

The predetermined overhead rate used to apply overhead to finished jobs is determined before the period begins.

How do you compute predetermined overhead rate as a percentage of direct labor costs and direct labor hours?

Predetermined overhead rate based on direct labor cost = Budgeted overhead cost / direct labor cost / 100 Predetermined overhead rate based on direct labor cost = budgeted overhead cost / direct labor hours.

What is the advantage of using a predetermined overhead application rate?

RUNOVER

How do I compute predetermined overhead rate as a percentage of direct labor costs?

Predetermined overhead rate = Est. total Manuf. Overhead Cost / Est. total amt of allocation base In this case, allocation base would be direct labor (as opposed to machine labor). Hope this helps

How is predetermined overhead rates useful in costing?

It allows you to forecast future costs needed to do business.

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