What are the two components of a predetermined overhead rate?

Question

Quizplus · Accepted Answer

The two components of a predetermined overhead rate are estimated annual costs and expected annual activity. This is because the predetermined overhead rate is calculated by dividing the estimated annual overhead costs by the expected annual activity level, such as direct labor hours or machine hours. Using estimated costs and expected activity allows for a more predictable overhead rate that can be used for budgeting and cost control purposes.

What Are the Two Components of a Predetermined Overhead Rate