Question

A pre-determined overhead rate includes:_____.

a. estimated total manufacturing overhead cost in the numerator.
b. only the fixed portion of the estimated manufacturing overhead cost in the numerator.
c. only the variable portion of the estimated manufacturing overhead cost in the numerator.
d. estimated total manufacturing overhead cost in the denominator.

Answer 1

a. estimated total manufacturing overhead cost in the numerator.

Step-by-step explanation:

The formula to compute the pre-determined overhead rate is shown below;

As we know that

Pre-determined overhead rate is

= Estimated total manufacturing overhead cost ÷ estimated activity level

Here estimated activity level can be estimated direct labor hours, estimated machine hours etc

Therefore the option a is correct