1 Assuming Mccullough Uses Only One Predetermined Overhead Rate Calculate – Cost Calculator

McCullough Predetermined Overhead Rate Calculator

Estimated Total Manufacturing Overhead Cost ($)

Estimated Total Allocation Base (e.g., Machine Hours)

Actual Allocation Base Used

Actual Manufacturing Overhead Cost Incurred ($)

Calculation Results

Predetermined Overhead Rate: per unit of base

Applied Manufacturing Overhead:

Over/Underapplied Status:

Variance Amount:

Understanding the Predetermined Overhead Rate (POHR)

In managerial accounting, specifically for firms like McCullough, a Predetermined Overhead Rate (POHR) is used to apply manufacturing overhead costs to products or jobs. This is done before the actual costs are known to provide consistent pricing and cost estimation throughout the fiscal period.

The POHR Formula

The calculation follows a standard three-step process:

The Rate: Divide the estimated total manufacturing overhead by the estimated total allocation base (such as direct labor hours, machine hours, or direct labor dollars).
The Application: Multiply the POHR by the actual amount of the allocation base incurred during the period.
The Reconciliation: Compare the applied overhead to the actual overhead incurred to determine if overhead was overapplied or underapplied.

Example Calculation for McCullough

Suppose McCullough estimates $600,000 in overhead and expects to use 30,000 machine hours.

Step 1: $600,000 / 30,000 hours = $20.00 per machine hour.
Step 2: If McCullough actually uses 31,000 machine hours, the applied overhead is 31,000 * $20 = $620,000.
Step 3: If actual overhead costs were $615,000, the company has overapplied overhead by $5,000.

Why Use a Single Predetermined Rate?

While some companies use departmental rates or Activity-Based Costing (ABC), using one plant-wide predetermined overhead rate is simpler and less expensive to maintain. It is most effective when products consume overhead resources in roughly the same proportions throughout the facility.