How is the standard fixed overhead rate often calculated?
A)budgeted fixed overhead divided by practical capacity measured in standard hours
B)budgeted fixed overhead divided by actual capacity measured in standard hours
C)budgeted fixed overhead divided by actual hours
D)budgeted fixed overhead divided by practical capacity measured in actual hours

Question

Quizplus · Accepted Answer

The standard fixed overhead rate is typically calculated by dividing the budgeted fixed overhead by the practical capacity measured in standard hours. This method provides a more accurate representation of the overhead cost per unit of production, as it takes into account the expected level of utilization of the production facilities. Additionally, by using standard hours rather than actual hours, the standard fixed overhead rate is not affected by variations in the actual time required to produce a given volume of output.

How Is the Standard Fixed Overhead Rate Often Calculated