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21 May, 19:32

Predetermined overhead rate LO P3 At the beginning of a year, a company predicts total direct materials costs of $920,000 and total overhead costs of $1,330,000. If the company uses direct materials costs as its activity base to allocate overhead, what is the predetermined overhead rate it should use during the year?

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  1. 21 May, 23:06
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    145%

    Explanation:

    Given that,

    Company predicts total direct materials costs = $920,000

    Total overhead costs = $1,330,000

    Predetermined Overhead rate:

    = (Total overhead cost : Total direct material cost) * 100

    = ($1,330,000 : $920,000) * 100

    = 1.45 * 100

    = 145%

    Therefore, the predetermined overhead rate it should use during the year is 145%.
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