When calculating a departmental overhead rate, what should the denominator be?
A)Total estimated amount of the departmental allocation base
B)Total estimated departmental overhead cost pool
C)Total estimated amount of manufacturing overhead for the factory
D)Actual quantity of the departmental allocation base used by the job

Question

Quizplus · Accepted Answer

The denominator for calculating a departmental overhead rate should be the total estimated amount of the departmental allocation base. This allocation base is usually a measure of the activity that drives overhead costs in a specific department. Using the total estimated amount of the departmental allocation base as the denominator ensures that the overhead rate is appropriate for the level of activity in the department.

When Calculating a Departmental Overhead Rate, What Should the Denominator