<P> A pre-determined overhead rate is the rate used to apply manufacturing overhead to work - in - process inventory . The pre-determined overhead rate is calculated before the period begins . The first step is to estimate the amount of the activity base that will be required to support operations in the upcoming period . The second step is to estimate the total manufacturing cost at that level of activity . The third step is to compute the predetermined overhead rate by dividing the estimated total manufacturing overhead costs by the estimated total amount of cost driver or activity base . Common activity bases used in the calculation include direct labor costs , direct labor hours , or machine hours . </P>
<P> A pre-determined overhead rate is the rate used to apply manufacturing overhead to work - in - process inventory . The pre-determined overhead rate is calculated before the period begins . The first step is to estimate the amount of the activity base that will be required to support operations in the upcoming period . The second step is to estimate the total manufacturing cost at that level of activity . The third step is to compute the predetermined overhead rate by dividing the estimated total manufacturing overhead costs by the estimated total amount of cost driver or activity base . Common activity bases used in the calculation include direct labor costs , direct labor hours , or machine hours . </P>
when is the predetermined manufacturing overhead rate computed
when is the predetermined manufacturing overhead rate computed
before the period begins
before the period begins