The standard fixed overhead rate is calculated as
A)Actual fixed overhead/Actual activity.
B)Budgeted fixed overhead/Budgeted activity.
C)Budgeted fixed overhead/Actual activity.
D)Budgeted overhead/Budgeted activity.

Question

Quizplus · Accepted Answer

The standard fixed overhead rate is determined by dividing the budgeted fixed overhead for a period by the budgeted level of activity for that period, as this provides an estimate of the fixed overhead cost per unit of activity. Option A is incorrect because it uses actual fixed overhead instead of budgeted fixed overhead. Option C is incorrect because it uses actual activity instead of budgeted activity. Option D is incorrect because it uses only "overhead" instead of "fixed overhead."

The Standard Fixed Overhead Rate Is Calculated as