Professional Documents
Culture Documents
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
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Will E. Delite
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Learning Objective 1
Compute a predetermined
overhead rate.
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Computing Predetermined
Overhead Rates
The predetermined overhead rate is computed before the period begins
using a four-step process.
1.Estimate the total amount of the allocation base (the denominator) that
will be required for next period’s estimated level of production.
2.Estimate the total fixed manufacturing overhead cost for the coming
period and the variable manufacturing overhead cost per unit of the
allocation base.
3.Use the following equation to estimate the total amount of
manufacturing overhead:
Y = a + bX
Where,
Y = The estimated total manufacturing overhead cost
a = The estimated total fixed manufacturing overhead cost
b = The estimated variable manufacturing overhead cost
per unit of the allocation base
X = The estimated total amount of the allocation base
Learning Objective 2
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Learning Objective 3
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Quick Check 1
Job WR53 at NW Fab, Inc. required $200 of direct
materials and 10 direct labor hours at $15 per hour.
Estimated total overhead for the year was $760,000
and estimated direct labor hours were 20,000. What
would be recorded as the cost of job WR53?
a. $200.
b. $350.
c. $380.
d. $730.
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Learning Objective 4
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End of Chapter 3
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