means of a predetermined overhead rate, which is computed Estimated manufacturing overhead
By some measure of the Annual activity level
Explanation:
Manufacturing overhead is applied to production by means of a predetermined overhead rate which is computed under the general formula of dividing estimated manufacturing overhead by some measure of the annual activity level
The manufacturing overhead costs are indirect costs incurred by a business/company in the production process. these costs are classified as overhead costs because they do not affect the production of the goods and services directly they include costs like : rent and administrative costs.
Generally speaking, manufacturing overhead is applied to production by means of a predetermined overhead rate, which is computed under the general formula of dividing estimated overhead rate by some measure of the annual activity level.
A predetermined overhead rate is usually calculated at the beginning of an accounting period. It is calculated by dividing the estimated manufacturing overhead by an activity driver (e.g machine hours).
