Which of the following is the correct method to calculate a predetermined overhead rate?
A) Budgeted total manufacturing cost ÷ budgeted amount of cost driver.
B) Budgeted overhead cost ÷ budgeted amount of cost driver.
C) Budgeted amount of cost driver ÷ budgeted overhead cost.
D) Actual overhead cost ÷ budgeted amount of cost driver.
E) Actual overhead cost ÷ actual amount of cost driver.

Question

Quizplus · Accepted Answer

Predetermined overhead rate is calculated by dividing the budgeted overhead cost by the budgeted amount of cost driver. This is because the predetermined overhead rate is used to allocate overhead costs to products based on the activity level of the cost driver.

Which of the Following Is the Correct Method to Calculate