A company expected its annual overhead costs to be $900,000 and direct labor costs to be $1,000,000. Actual overhead was $870,000, and actual labor costs totaled $1,100,000. How much is the company's predetermined overhead rate to the nearest cent?

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the estimated overhead costs by the estimated direct labor costs: $900,000 / $1,000,000 = $0.90.

A Company Expected Its Annual Overhead Costs to Be $900,000