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A pre-determined overhead rate is normally the term when using a single, plant-wide base to calculate and apply overhead. Overhead is then applied by multiplying the pre-determined overhead rate by the actual driver units. Any difference between applied overhead and the amount of overhead actually incurred is called over- or under-applied overhead.
Pros. Cons. Lower risk than equity. Limited upside if business does well. Predetermined interest rate. Limited ability to influence strategy. May recoup some or all of investment if business fails
Academics have argued against these charges. For example, Benjamin Ginsberg showed how overhead rates are primarily used to subsidize ballooning administrative salaries and building depreciation, neither of which directly benefit research; although it does benefit the administrators that determine university policy in his book The Fall of Faculty.
For Example: if the railway coach company normally produced 40 coaches per month, and the fixed costs were still $1000/month, then each coach could be said to incur an Operating Cost/overhead of $25 =($1000 / 40).
Examples of overhead costs include: payment of rent on the office space a business occupies; cost of electricity for the office lights; some office personnel wages; Non-overhead costs are incremental such as the cost of raw materials used in the goods a business sells. Operating Cost is calculated by Cost of goods sold + Operating Expenses.
For example: if the railway coach company normally produced 40 coaches per month, and the fixed costs were still $1000/month, then each coach could be said to incur an Operating Cost/overhead of $25 =($1000 / 40). Adding this to the variable costs of $300 per coach produced a full cost of $325 per coach.
A grant requesting $100k in direct costs with an indirect cost rate of 50%, for example, means that the request will include an additional request for $50k for indirect costs for a total request of $150k, as opposed to a request for $100k of indirect costs for a total request of $200k.
The record-high CD rates in 2022 and 2023 were primarily driven by the Fed's aggressive rate hikes. Between March 2022 and July 2023, the FOMC increased the fed funds rate a total of 11 times ...