Five basis used for calculating predetermined factory overhead rates

FOH predetermined rate is calculate on five bases which are as follows:

1. Materials costs
2. Direct labor cost
3. Direct labor hours
4. Machine hours
5. Units of production

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

2. 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

3. Direct labor hours:

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

                          Predetermined FOH rate= Estimated FOH 

                                                                         Direct labor hours

3. Machine hours:

                                        If we calculate FOH rate predetermined on the bases of machine  hours. The formula is:

                          Predetermined FOH rate= Estimated FOH 

                                                                           Machine hours

3. Units of Production:

                                        If we calculate FOH rate predetermined on the bases of Units of production. The formula is:

                          Predetermined FOH rate= Estimated FOH 

                                                             

                                                                     Units of production