You take estimated overhead divided by the estimated level of production activity. It is used to assign overhead to production.
The predetermined overhead rate used to apply overhead to finished jobs is determined before the period begins.
Predetermined overhead rate based on direct labor cost = Budgeted overhead cost / direct labor cost / 100 Predetermined overhead rate based on direct labor cost = budgeted overhead cost / direct labor hours.
RUNOVER
Predetermined overhead rate is that overhead rate calculated before start of production to allocate overhead costs to units of products by using some ratio in relation to some other cost like material cost or labor cost or labor hours etc.
It is used for operating the deals .
Weaver Company's predetermined overhead rate is $18.00 per direct labor-hour and its direct labor wage rate is $12.00 per hour.
The benefits of using predetermined overhead rates is that budgeting and allocation of cash flows become easier. It also helps the firm to conserve resources to stay within a budget.
because they have no life, also they predetmined pigs
Predetermined overhead rate is calculated according to the normal production capacity of the plant.
Predetermined overhead rate = Est. total Manuf. Overhead Cost / Est. total amt of allocation base In this case, allocation base would be direct labor (as opposed to machine labor). Hope this helps
It allows you to forecast future costs needed to do business.
Predetermined rate is overhead rate allocated to product cost to find out the full product cost and it is an estimated rate based on total expected overhead on normal capacity divided by some machine hours or direct labor hours etc.