Predetermined Overhead Rate Calculator
Set the rate used to apply manufacturing overhead to jobs for the coming period.
In short
Set the rate used to apply manufacturing overhead to jobs for the coming period.
Formula: Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total allocation base
What this calculator does
Budgeted overhead for the period divided by the budgeted quantity of the chosen allocation base. Both figures are the organisation's own budget. No industry overhead percentage is suggested.
Use it to turn Currency, Estimated manufacturing overhead, Estimated allocation base, Actual base used so far (optional) into a checked result you can compare, copy, or rerun with different assumptions.
The page shows the formula, a numeric worked example, and the assumptions that affect this professional & industry calculation.
Inputs and what they mean
- Currency
- — Amounts are shown in the currency you pick. No exchange rate is applied..
- Estimated manufacturing overhead
- — number value.
- Estimated allocation base
- — Direct labour hours, machine hours or direct labour cost..
- Actual base used so far (optional)
- — number value.
How to use it
- Enter your own figures — the calculator never fills in a rate, price or benchmark for you.
- Press Calculate to see the result.
- Read the formula, variables, assumptions and source below the result before you rely on it.
Formula
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total allocation base.
Inputs used: Currency, Estimated manufacturing overhead, Estimated allocation base, Actual base used so far (optional).
Edge handling: Estimated manufacturing overhead is required.; Estimated manufacturing overhead cannot be negative.; Estimated manufacturing overhead must be no more than 1000000000000.; Estimated allocation base is required.; Estimated allocation base must be greater than zero..
Worked example
$600,000 of overhead over 40,000 machine hours
- Start with Currency: USD, Estimated manufacturing overhead: 600000, Estimated allocation base: 40000, Actual base used so far (optional): 38500.
- Apply the method: Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total allocation base.
- A planning rate of $15.00 per machine hour.
Reading the result
The headline figure is the main answer. Any breakdown underneath shows the parts that make it up, so you can check the working and see what changes when you adjust an input.
Limitations and assumptions
- Inputs outside the supported range are rejected rather than forced into a result.
- The result depends on the values you enter for this predetermined overhead rate calculator; it does not supply missing rates, rules, prices, dates, or assumptions for you.
Reference: OpenStax — Principles of Accounting, Volume 2: Managerial Accounting
Last reviewed:
Common questions
Where does this formula come from?
OpenStax, Principles of Accounting Volume 2: Managerial Accounting, job order costing. See the source link on this page.
What kind of calculation is this?
Budgeted overhead for the period divided by the budgeted quantity of the chosen allocation base. Check the formula, example, and limitations on this page before using the result for a real professional & industry decision.
What are its limits?
A planning rate. Actual overhead will differ, producing over- or under-applied overhead.
How do I use the Predetermined Overhead Rate Calculator?
Enter the required values for Currency, Estimated manufacturing overhead, Estimated allocation base, Actual base used so far (optional). The calculator applies the formula on this page and shows the main result with any supporting breakdown so you can check the arithmetic.
What formula does the Predetermined Overhead Rate Calculator use?
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total allocation base The visible formula section above lists the calculation path and the edge cases the page handles, so the result can be checked without relying on the form alone. Check the formula, example, and limitations on this page before using the result for a real professional & industry decision.
Can the Predetermined Overhead Rate Calculator be used for exact decisions?
Use it as a calculation aid, not as a substitute for checking the underlying rule, contract, policy, or professional advice that applies to your situation. When a result depends on local rules, personal details, prices, or dates, enter those values yourself and confirm them before acting.
Formula, source and verification
Budgeted overhead for the period divided by the budgeted quantity of the chosen allocation base.
The question it answers: What rate should we use to apply factory overhead to jobs this year?
The formula
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total allocation base
- OH — Estimated manufacturing overhead
- (currency). Budgeted indirect production cost for the period.
- Base — Estimated allocation base
- (hours or currency). Budgeted direct labour hours, machine hours or direct labour cost.
- Applied — Actual base used
- (hours or currency). Optional: actual activity, to show overhead applied.
Units: Currency per base unit.
What kind of calculation this is
Business input model. The answer depends on business figures only you can supply, such as your own costs, rates or volumes. No market or benchmark values are assumed for you.
Method
Both figures are the organisation's own budget. No industry overhead percentage is suggested.
Assumptions built into the result
- Mathematical: Overhead and base are budgeted for the same period and the same cost pool.
Figures this calculator will never guess for you
- No typical or average overhead rate is inserted.
Limitations
- A planning rate. Actual overhead will differ, producing over- or under-applied overhead.
Source and version
- Standard or reference
- Job order costing — predetermined overhead rate (OpenStax, Principles of Accounting Volume 2: Managerial Accounting, job order costing.)
- Published source
- OpenStax — OpenStax (CC BY)
- Formula version
- Version 1
- Verification
- Reviewed against the cited source on
- How much weight the source carries
- Academic
- Applies to
- Currency
- Amounts stay in the currency you choose; no exchange rate is applied.
Cite this page
Free Calculator. (2026, September 15). Predetermined Overhead Rate Calculator. https://freecalculator.tech/tools/predetermined-overhead-rate-calculator
"Predetermined Overhead Rate Calculator." Free Calculator, 15 Sept. 2026, https://freecalculator.tech/tools/predetermined-overhead-rate-calculator.
Predetermined Overhead Rate Calculator — Free Calculator, https://freecalculator.tech/tools/predetermined-overhead-rate-calculator
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