Question

Which of the following is the correct formula to compute the predetermined overhead rate?A. Estimated total units in the allocation base divided by estimated total manufacturing overhead costs.B. Estimated total manufacturing overhead costs divided by actual total units in the allocation base.C. Estimated total manufacturing overhead costs divided by estimated total units in the allocation base.D. Actual total manufacturing overhead costs divided by estimated total units in the allocation base.

Answer 1

Answer:

.B. Estimated total manufacturing overhead costs divided by actual total units in the allocation base.

Explanation:

the predetermined overhead rate=

Estimated total manufacturing overhead costs divided by actual total units in the allocation base.

predetermined overhead rate is usually applied early, it is rate of overhead cost to actual cost.

Let us say we have

Estimated total manufacturing overhead costs value of 400 with Estimated total units in the allocation of 10 with real unit of 100.

Then Predetermined overhead rate = 400 ÷ 10 = 40

Real overhead cost = overhead rate × real units

Then, Real overhead cost = 40 × 100 = 300