.pohr-calc-wrapper {
background: #f9f9f9;
border: 1px solid #e0e0e0;
border-radius: 8px;
padding: 30px;
margin-bottom: 40px;
box-shadow: 0 4px 6px rgba(0,0,0,0.05);
}
.pohr-input-group {
margin-bottom: 20px;
}
.pohr-label {
display: block;
font-weight: 600;
margin-bottom: 8px;
color: #333;
}
.pohr-input {
width: 100%;
padding: 12px;
border: 1px solid #ccc;
border-radius: 4px;
font-size: 16px;
box-sizing: border-box;
}
.pohr-select {
width: 100%;
padding: 12px;
border: 1px solid #ccc;
border-radius: 4px;
font-size: 16px;
background-color: white;
box-sizing: border-box;
}
.pohr-btn {
background-color: #2c3e50;
color: white;
border: none;
padding: 14px 24px;
font-size: 16px;
font-weight: bold;
border-radius: 4px;
cursor: pointer;
width: 100%;
transition: background-color 0.2s;
}
.pohr-btn:hover {
background-color: #34495e;
}
.pohr-result {
margin-top: 25px;
padding: 20px;
background-color: #e8f4f8;
border-left: 5px solid #3498db;
border-radius: 4px;
display: none;
}
.pohr-result-value {
font-size: 24px;
font-weight: bold;
color: #2c3e50;
margin-bottom: 10px;
}
.pohr-breakdown {
font-size: 14px;
color: #666;
margin-top: 10px;
border-top: 1px solid #dcdcdc;
padding-top: 10px;
}
.article-content {
line-height: 1.6;
color: #444;
}
.article-content h2 {
color: #2c3e50;
margin-top: 30px;
}
.article-content ul {
margin-bottom: 20px;
}
.formula-box {
background: #eee;
padding: 15px;
border-radius: 5px;
font-family: monospace;
text-align: center;
margin: 20px 0;
font-size: 1.1em;
}
function updateLabel() {
var type = document.getElementById('allocationBaseType').value;
var label = document.getElementById('baseQuantityLabel');
if (type === "Direct Labor Cost") {
label.innerText = "Estimated Total Direct Labor Cost ($)";
document.getElementById('estBaseQuantity').placeholder = "e.g. 100000";
} else {
label.innerText = "Estimated Total " + type;
document.getElementById('estBaseQuantity').placeholder = "e.g. 20000";
}
}
function calculatePOHR() {
// Get inputs
var overhead = parseFloat(document.getElementById('estOverheadCost').value);
var baseQty = parseFloat(document.getElementById('estBaseQuantity').value);
var baseType = document.getElementById('allocationBaseType').value;
var resultDiv = document.getElementById('pohrResult');
var resultDisplay = document.getElementById('finalRateDisplay');
var breakdownDisplay = document.getElementById('calculationBreakdown');
// Validation
if (isNaN(overhead) || isNaN(baseQty) || overhead < 0 || baseQty <= 0) {
resultDiv.style.display = "block";
resultDiv.style.backgroundColor = "#ffebee";
resultDiv.style.borderLeftColor = "#ef5350";
resultDisplay.innerHTML = "Input Error";
breakdownDisplay.innerHTML = "Please enter valid positive numbers. The allocation base cannot be zero.";
return;
}
// Calculation
var rate = overhead / baseQty;
var formattedRate = "";
var suffix = "";
// Reset styles
resultDiv.style.backgroundColor = "#e8f4f8";
resultDiv.style.borderLeftColor = "#3498db";
// Formatting based on type
if (baseType === "Direct Labor Cost") {
// Usually expressed as a percentage of cost
var percentage = rate * 100;
formattedRate = percentage.toFixed(2) + "%";
suffix = " of Direct Labor Cost";
} else {
// Usually expressed as Currency per Unit
formattedRate = "$" + rate.toFixed(2);
// Singularize the unit for display
var singularUnit = baseType;
if(baseType.endsWith('s')) {
singularUnit = baseType.slice(0, -1); // Remove 's'
}
suffix = " per " + singularUnit;
}
// Display Results
resultDiv.style.display = "block";
resultDisplay.innerHTML = formattedRate + suffix;
// Show the math
var numStr = overhead.toLocaleString('en-US', {style: 'currency', currency: 'USD'});
var denStr = baseQty.toLocaleString('en-US');
if (baseType === "Direct Labor Cost") {
denStr = baseQty.toLocaleString('en-US', {style: 'currency', currency: 'USD'});
}
breakdownDisplay.innerHTML = "Calculation: " + numStr + " (Estimated Overhead) ÷ " + denStr + " (Estimated Base) = " + formattedRate + suffix;
}
Understanding the Predetermined Overhead Allocation Rate
In managerial accounting, allocating indirect costs to specific jobs or products is a critical task for pricing and profitability analysis. The predetermined overhead allocation rate is calculated by dividing the estimated total manufacturing overhead costs by the estimated total amount of the allocation base.
This calculation is performed at the beginning of an accounting period (typically a year) to allow companies to apply overhead to jobs as they are completed, rather than waiting for actual costs to be finalized at the end of the year.
Predetermined Overhead Rate = Estimated Total Manufacturing Overhead Costs / Estimated Total Allocation Base
Why Use a Predetermined Rate?
Manufacturing overhead consists of indirect costs like factory rent, electricity, depreciation on equipment, and indirect labor. Unlike direct materials or direct labor, these costs cannot be easily traced to a single unit of product.
If a company waited until the end of the year to calculate actual overhead rates, they would not know the true cost of their products during the year. This would make it impossible to:
- Set accurate prices for customers.
- Bid on new contracts competitively.
- Evaluate the profitability of specific production runs immediately.
Step-by-Step Calculation Guide
To use the calculator above effectively, you need two primary figures derived from your company's annual budget:
1. Estimated Manufacturing Overhead
Sum up all budgeted indirect costs for the coming period. This includes items such as:
- Factory utilities (heat, light, power)
- Factory insurance and property taxes
- Depreciation on factory machinery
- Salaries of factory supervisors and maintenance staff
2. Estimated Allocation Base
The allocation base (also called the cost driver) should be the activity that causes the overhead costs to increase. Common bases include:
- Direct Labor Hours: Used when production is labor-intensive.
- Machine Hours: Used when production is highly automated.
- Direct Labor Cost: Used when overhead correlates with the wages paid to workers.
Real-World Example
Let's say TechFabricators Inc. is preparing their budget for the upcoming year. They estimate the following:
- Total Manufacturing Overhead: $1,200,000
- Total Machine Hours expected: 80,000 hours
Using the formula:
$1,200,000 ÷ 80,000 hours = $15.00 per machine hour
This means that for every hour a machine runs to produce a product, TechFabricators adds $15.00 to the cost of that product to account for overhead.
Applied Overhead vs. Actual Overhead
It is important to note that this calculator gives you the predetermined rate. At the end of the year, you will likely have a difference between the overhead applied to products (Predetermined Rate × Actual Activity) and the actual overhead costs incurred. This difference results in underapplied or overapplied overhead, which is adjusted in the Cost of Goods Sold (COGS) account.