Discuss three basis used for calculating predetermined factory overhead rates?

Discuss three basis used for calculating predetermined factory overhead rates?


 FOH predetermined rate is calculate on five bases some of these are follows:

  1. Materials costs
  2. Direct labor cost
  3. Direct labor hours


  1. Materials costs:

                                  We can calculate predetermined FOH rate on the bases of materials cost by the following formula:

                       Predetermined FOH rate= Estimated FOH ×100
                                                                    Materials cost

  1. Direct labor cost:
                                    We can calculate FOH predetermined rate on the bases of direct labor cost, the formula is:

                           Predetermined FOH rate= Estimated FOH ×100
                                                                         Direct labor cost


  1. Direct labor hours:
                                        If we calculate FOH rate predetermined on the bases of direct labor hours. The formula is:

                          Predetermined FOH rate= Estimated FOH ×100
                                                                         Direct labor hours

     

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