The formula for calculating the predetermined overhead rate for a cost pool is:
A) Actual overhead for the cost pool ¸ Estimated units of the cost driver
B) Estimated overhead for the cost pool ¸ Actual units of the cost driver
C) Actual overhead for the cost pool ¸ Actual units of the cost driver
D) Estimated overhead for the cost pool ¸ Estimated units of the cost driver

Question

Quizplus · Accepted Answer

The predetermined overhead rate for a cost pool is calculated by dividing the estimated overhead for that cost pool by the estimated units of the cost driver. This is because the predetermined overhead rate is used to allocate overhead costs to products or services based on the estimated usage of the cost driver. Actual overhead and units would not be used in the calculation, as they may not accurately reflect the expected usage of the cost driver.

The Formula for Calculating the Predetermined Overhead Rate for a Cost