Budgeted factory overhead rates are calculated as
A) budgeted total overhead/budgeted total activity.
B) estimated total overhead/actual total activity.
C) actual total overhead/actual total activity.
D) actual total overhead/estimated total activity.

Question

Quizplus · Accepted Answer

Budgeted factory overhead rate is calculated using the formula, budgeted total overhead/budgeted total activity. The estimate of total overhead cost is divided by the estimated level of activity to calculate the overhead rate, which is then applied to each unit of activity to determine the overhead cost to be charged to each product. Option B refers to estimated total overhead and actual total activity which is incorrect. Option C refers to actual total overhead which is not used in calculating the budgeted factory overhead rate. Option D refers to actual total overhead and estimated total activity which is also incorrect.

Budgeted Factory Overhead Rates Are Calculated as