How Do You Find The Predetermined Overhead Rate?
The predetermined overhead rate is the budgeted rate that is calculated based on the denominator level of activity. The denominator level of activity is the planned level of business activity upon which the budget is based. The formula to find the predetermined overhead rate is: predetermined overhead rate = flexible budget overhead at denominator activity level/denominator activity level This article demonstrates through example how to find the predetermined overhead rate. Information from the problem below is used. The Qwerty company is performing financial analysis of business performance in its manufacturing sector. The denominator level of activity was 7,000 machine-hours. The variable component of the flexible budget was $10,000. The fixed component of the flexible budget was $52,000. What is the predetermined overhead rate? Find the information needed to find the predetermined overhead rate. flexible budget fixed overhead at denominator activity level = $52,000 flexible budget v
