A predetermined overhead rate is calculated using estimated or predicted cost and volume data.

Question

Quizplus · Accepted Answer

A predetermined overhead rate is calculated by estimating the total amount of overhead costs that will be incurred during a period and dividing it by an estimated allocation base, such as direct labor hours or machine hours. This rate is then used to apply overhead costs to products or services based on actual usage of the allocation base.

A Predetermined Overhead Rate Is Calculated Using Estimated or Predicted