Pre-determined overhead rate

A pre-determined overhead rate is the rate used to apply manufacturing overhead to work-in-process inventory. It is calculated as estimated manufacturing overhead cost divided by estimated amount of cost driver or activity base. Common activity bases used in the calculation include direct labor costs, direct labor hours, or machine hours.

The use of such a rate enables an enterprise to determine the approximate total cost of each job when completed. In recent years increased automation in manufacturing operations has resulted in a trend towards machine hours as the activity base in the calculation.

This is related to an activity rate which is a similar calculation used in Activity-Based Costing. A pre-determined overhead rate is normally the term when using a single, plant-wide base to calculate and apply overhead. Overhead is then applied by multiplying the pre-determined overhead rate by the "actual" driver units. Any difference between applied overhead and the amount of overhead actually incurred is called over- or under-applied overhead.

External links

* [http://www.accd.edu/SAC/slac/handouts/acct/2302/chpt_notes_20.htm Accounting note on predetermined overhead rate]
* [http://drtaccounting.blogspot.com/2008/01/manufacturing-overhead.html Determining the predetermined manufacturing overhead rate]


Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Abkürzungen/Luftfahrt/L–R — Dies ist der vierte Teil der Liste Abkürzungen/Luftfahrt. Liste der Abkürzungen Teil 1 A A Teil 2 B–D B; C; D Teil 3 E–K …   Deutsch Wikipedia

  • Irrigation — For its use in viticulture, see Irrigation in viticulture. For its use in medicine, see Therapeutic irrigation. LEPA redirects here. For the airport serving Palma de Mallorca, Spain, assigned the ICAO code LEPA, see Palma de Mallorca Airport.… …   Wikipedia

  • Entity–attribute–value model — (EAV) is a data model to describe entities where the number of attributes (properties, parameters) that can be used to describe them is potentially vast, but the number that will actually apply to a given entity is relatively modest. In… …   Wikipedia

  • MTR — This article is about the metro system in Hong Kong. For the company that operates the system, see MTR Corporation. For other meanings of MTR , see MTR (disambiguation). Mass Transit Railway (MTR) …   Wikipedia

  • Elevator — For other uses, see Elevator (disambiguation). A set of lifts in the lower level of a London Underground station. The arrows indicate each elevator s position and direction of travel …   Wikipedia

  • RadioShack — Infobox Company company name = RadioShack Corporation company company type = nyse|RSH company slogan = Do Stuff foundation = 1921 location = Fort Worth, Texas, USA key people = Julian Day, Current CEO industry = Retail num employees = 37500+… …   Wikipedia

  • M198 howitzer — Infobox Weapon name= M198 howitzer caption= A 155 mm M198 howitzer firing. origin= United States type= towed howitzer is ranged= is bladed= is explosive= is artillery= yes is vehicle= is missile= is UK= service= used by= U.S. Army, USMC,… …   Wikipedia

  • Router (computing) — A Cisco ASM/2 32EM router deployed at CERN in 1987 …   Wikipedia

  • ECONOMIC AFFAIRS — THE PRE MANDATE (LATE OTTOMAN) PERIOD Geography and Borders In September 1923 a new political entity was formally recognized by the international community. Palestine, or Ereẓ Israel as Jews have continued to refer to it for 2,000 years,… …   Encyclopedia of Judaism

  • India — /in dee euh/, n. 1. Hindi, Bharat. a republic in S Asia: a union comprising 25 states and 7 union territories; formerly a British colony; gained independence Aug. 15, 1947; became a republic within the Commonwealth of Nations Jan. 26, 1950.… …   Universalium


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.