Applied Overhead Calculator

How to Use the Calculator

1. Enter your total manufacturing overhead costs (e.g., rent, utilities, depreciation on factory equipment)
2. Specify the activity base you will use (e.g., machine hours, direct labor hours)
3. Enter the estimated activity for the period (e.g., estimated machine hours or labor hours)
4. Click the "Calculate" button to determine your predetermined overhead rate and the overhead applied to production

Working Principle

The calculator uses the following formula to determine the predetermined overhead rate:

Predetermined Overhead Rate = Total Overhead / Estimated Activity

This rate is then multiplied by the actual activity to determine the overhead applied to production:

Overhead Applied = Predetermined Overhead Rate × Actual Activity

Example

Suppose a company has total manufacturing overhead costs of $500,000 and expects to use 10,000 machine hours during the period. The predetermined overhead rate would be:

$500,000 / 10,000 hours = $50 per machine hour

If the company actually uses 8,000 machine hours, the overhead applied to production would be:

$50 per hour × 8,000 hours = $400,000

When to Use This Calculator

This calculator is particularly useful for:

• Manufacturing companies that need to allocate overhead costs to products
• Managers who need to budget and forecast manufacturing costs
• Accountants who need to determine product costs for financial reporting