Component |
Description |
Predetermined Overhead Rate |
The rate used to allocate overhead costs to products or services, calculated before the period begins. |
Actual Activity Base |
The actual amount of the activity base used, such as direct labor hours or machine hours. |
Applied Overhead |
The overhead cost assigned to products or services based on the predetermined overhead rate and the actual activity base. |
Formula |
Applied Overhead = Predetermined Overhead Rate × Actual Activity Base |
Purpose |
Used to allocate overhead costs to products or services, helping to determine the total cost of production. |