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Because of their focus on total risk, RADRs are the best theoretical method for adjusting for project risk and are therefore used most often in practice.
Predetermined Overhead Rate
A rate calculated before a period begins, used to allocate manufacturing overhead to products based on a relevant activity base.
Direct Labor-Hours
The total hours worked by employees directly involved in the production of goods.
Manufacturing Overhead
The indirect factory-related costs that are incurred when a product is manufactured, including costs such as maintenance, utilities, and equipment depreciation.
Predetermined Overhead Rate
An estimated rate used to assign overhead costs to products or job orders, based on a selected activity base.
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