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    jacqui-2503's Avatar
    jacqui-2503 Posts: 1, Reputation: 1
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    #1

    Jul 16, 2009, 07:19 AM
    Magerial Accounting
    How do I calculate Overhead application rate?
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #2

    Jul 16, 2009, 07:59 PM

    estimated annual overhead costs divided by estimated annual activity base

    The activity base will be given in the problem, and common ones used are direct labor hours and machine hours.

    For instance, if overhead costs are estimated to be $200,000 and machine hours are estimated to be 100,000:

    $200,000/100,000 hrs = $2 per machine hour, which is your rate to be used all year.
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