A predetermined overhead rate is calculated as follows:

A) budgeted manufacturing overhead/budgeted amount of cost driver.
B) budgeted amount of cost driver/budgeted manufacturing overhead.
C) budgeted manufacturing overhead/budgeted amount of non-manufacturing overhead.
D) budgeted manufacturing overhead/ budgeted total expenses.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to products based on a specific activity base.

Budgeted Manufacturing Overhead

The estimated total indirect costs related to the production process, planned for a specific period.

Cost Driver

A factor that causes or relates to a change in the cost of an activity or a product, such as machine-hours, labor-hours, or material usage.