The standard overhead rate is computed separately for which of the following?

The standard overhead rate is computed separately for which of the following?

• A. Direct materials and direct labor
• B. Variable costs only
• C. Fixed costs only
• D. Fixed and variable costs

Answer: (D)

Overhead costs consist of fixed and variable components, and you compute standard rates for each separately. The variable portion changes with the level of activity, so the standard variable overhead rate is based on budgeted variable overhead divided by the chosen activity base. The fixed portion stays constant within the relevant range, so the standard fixed overhead rate is based on budgeted fixed overhead divided by the same or a related activity base. This separation lets you allocate costs accurately and analyze variances for both the variable and fixed parts of overhead.

Overhead costs consist of fixed and variable components, and you compute standard rates for each separately. The variable portion changes with the level of activity, so the standard variable overhead rate is based on budgeted variable overhead divided by the chosen activity base. The fixed portion stays constant within the relevant range, so the standard fixed overhead rate is based on budgeted fixed overhead divided by the same or a related activity base. This separation lets you allocate costs accurately and analyze variances for both the variable and fixed parts of overhead.