Respuesta :
Overhead are considered as the taken a toll that's caused in a fabricating trade. Amid the time of fabricating of merchandise or administrations, these costs will in a roundabout way influence them. The expenses paid to accounting and utilities are illustrations of overhead.
What are the factors?
- Factors to be considered in selecting an allocation base to be used in computing a predetermined overhead rate -
- Predetermined overhead rate is calculated before manufacturing or production starts. Estimations are considered for this. For selecting an allocation base, generally three cost drivers are used - labour hours, machine hours and labour costs. Manufacturing overhead costs are costs other than direct costs of the product. Now such cost is to be allocated to product on some basis. For this, labour hours or machine hours or labour costs is considered.
- Suppose predetermined overhead cost is $100000. Total direct labour hours = 500 hours. So predetermined overhead rate is $100000/500 hours = $200 per hour.
- Now this rate is used to allocate indirect cost to different products based on their labour hours used.
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