Predetermined Overhead Rate Calculator

Formula

The formula to calculate the Predetermined Overhead Rate (POR) is:

\[ POR = \frac{MOC}{UA} \]

Where:

$ POR $ is the predetermined overhead rate
$ MOC $ is the manufacturing overhead cost ($)
$ UA $ is the units of allocation

What is Predetermined Overhead Rate?

A predetermined overhead rate is defined as the ratio of manufacturing overhead costs to the total units of allocation. It is used to allocate overhead costs to products or job orders based on a consistent rate, helping businesses estimate costs and set prices more accurately.

Example Calculation

Let's assume the following values:

Manufacturing Overhead Cost (MOC) = $50,000
Units of Allocation (UA) = 10,000

Using the formula to calculate the Predetermined Overhead Rate:

\[ POR = \frac{50000}{10000} = 5 \, \text{\$/unit} \]

The Predetermined Overhead Rate is $5 per unit.