The standard fixed overhead rate is often calculated as
A)budgeted fixed overhead divided by practical capacity measured in standard hours.
B)actual fixed overhead divided by practical 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.
E)none of these

Question

Quizplus · Accepted Answer

The standard fixed overhead rate is typically calculated using budgeted fixed overhead divided by practical capacity measured in standard hours. This allows for a predictable and standardized rate that can be applied to actual production levels. Option B uses actual fixed overhead which would not be useful for planning or predicting future costs, and option C uses actual hours which does not account for potential differences in efficiency or productivity compared to standard hours. Option D essentially combines the two ineffective approaches of using actual hours and actual fixed overhead, while option E is simply incorrect as option A is a common method for calculating the standard fixed overhead rate.

The Standard Fixed Overhead Rate Is Often Calculated as