How to calculate predetermined overhead rate in running a business


I’m helping my colleague - a small business owner. It’s a startup business. I’m trying to understand how to calculate a predetermined overhead rate for my company.

Can you recommend any resources or tools that would help me with this process?

Thanks again,


To calculate the predetermined overhead rate, you will need to determine your total overhead costs for a specific period of time, such as a month or a year.

Then, divide the total overhead costs by the number of units of production during that period to determine the predetermined overhead rate per unit.

For instance, if your total overhead costs for a year are $100,000 and you produce 1,000 units, your predetermined overhead rate would be $100 per unit.


Continuing @dladmin response.

The example of overhead expenses are rent, utilities, insurance, salaries, and supplies.

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