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    junebird's Avatar
    junebird Posts: 1, Reputation: 1
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    #1

    Sep 23, 2009, 05:42 PM
    Predetermined manufacturing overhead rate.
    I'm trying to understand/learn predetermined manufacturing overhead rate.

    I don't understand how to calculate predetermined manufacturing overhead rate. Also, would plant tilities and depreciation be considered overhead?
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #2

    Sep 23, 2009, 07:27 PM

    The predetermined overhead rate is estimated annual overhead costs divided by the estimated total activity base amount. The activity base can be anything they want, but commonly used ones are direct labor hours, direct labor dollars, and machine hours.

    And yes those are overhead costs. ALL costs that are related to production in any way, or related to the factory building in any way, but are not direct materials or direct labor, are overhead costs. So indirect materials, indirect labor, depreciation, factory supplies, insurance & taxes on the building, etc. are all overhead.

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