Question

If a worker earns $50 per hour in salary but the project is charged $75 per hour for each hour the individual works, then the overhead rate is

Answer 1

Overhead rate is calculated by dividing the overhead cost by the direct cost over a similar period of measurement. In our case, the basis is per hour. The overhead cost is the rough estimate of the cost made through the proper reference to the historical data for old establishments and projections for the new ones. This can be expressed as,
    overhead rate = (overhead cost / direct cost) x 100%

Substituting the known values,
   overhead rate = ($75 / $50) x 100%
   overhead rate = 150%

ANSWER: overhead rate = 150% 

Answer 2

The overhead rate is 150%.

Further Explanation:

Overhead: It refers to the costs required in running a business, but cannot be attributed to directly to any specific activity of the business. For example advertising, interest, supplies, travel expenditures, utilities accounting fees, taxes, insurance, repairs,telephone bills, legal fees, rent, and labor burden.

Overhead rate: It is the total indirect cost incurred in a specific time period according to the allocation criteria. The allocation measures are like machine time, square footage direct labor and hours.  

The overhead can be calculated as:

$\text{Overhead rate}=\dfrac{\text{Overhead cost}}{\text{Direct cost}}\times100$

Calculate the overhead rate:

$\begin{aligned}\text{Overhead rate}&=\dfrac{\text{Overhead cost}}{\text{Direct cost}}\times100\\&=\dfrac{\ 75}{\ 50}\times100\\&=150\%\end{aligned}$

Therefore, the overhead rate is 150%.

Learn more:

1. Learn more about the goal of the budget

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2.      Learn more about the profit margins

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3.      Learn more about the large expenditure

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Answer details:

Grade: High School

Subject: Cost Accounting

Chapter: Overheads

Keywords: worker, $50 per hour, the project is charged $75 per hour, for each hour the individual works, the overhead rate, Overhead rate, Cost Accounting, Overhead cost, direct cost, costing, variable cost, fixed cost, total cost, overhead cost, indirect cost, cost of the product, wages, expenses, costing, profit, loss.