Share
Explore BrainMass

What is predetermined overhead rate?

Just when you are starting to grasp the flow of costs from raw materials (direct materials) into work-in-process and then into finished goods, and think you might survive the managerial accounting course, you get hit with the Predetermined Overhead Rate. What?

What is predetermined overhead rate and how do you compute it? How does it lead to over and under applied overhead?

Solution Preview

Predetermined Overhead Rate

Just when you are starting to grasp the flow of costs from raw materials (direct materials) into work-in-process and then into finished goods, and think you might survive the managerial accounting course, you get hit with the Predetermined Overhead Rate. What?

Manufacturing overhead is rarely booked into work in process (even though you just spent a chapter learning to do this!). Instead, businesses book the "expected" overhead. How do they come up with the expected ...

Solution Summary

The tutorial is about a page and discusses why this is hard and how to simplify it. A computation is given as an example.

$2.19