period. Exhibit 2.9 shows the usual formula for computing a predetermined overhead rate (estimates are commonly based on annual amounts). This rate is used during the period to allocate overhead to jobs. It is common for companies to use multiple activity (allocation) bases and multiple predetermined overhead rates for different types of products and services.Point:The predetermined overhead rate is computed at the start of the period and is used throughout the period to allocate overhead to jobs.Point:Predetermined overhead rates can be estimated using mathematical equations, statistical analysis, or professional experience.EXHIBIT 2.9Predetermined Overhead Allocation Rate FormulaPredetermined overhead rate5Estimatedoverhead costs4EstimatedactivitybaseRecording Allocated Overhead To illustrate, Road Warriors allocates overhead by linking it to direct labor. At the start of the current period, management predicts total direct la-bor costs of $125,000 and total overhead costs of $200,000. Using these estimates, management computes its predetermined overhead rate as 160% of direct labor cost ($200,000 4$125,000). Specifically, reviewing the job order cost sheet in Exhibit 2.2, we see that $1,000 of direct labor went into Job B15. We then use the predetermined overhead rate of 160% to allocate $1,600 (equal to $1,000 31.60) of overhead to this job. The entry to record this allocation isAssets 5Liabilities 1Equity11,600 11,600Mar. 11 Goods in Process Inventory—Job B15 . . . . . . . . . . . . . . 1,600Factory Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . 1,600To assign overhead to Job B15.Example:If management predicts total direct labor costs of $100,000 and total overhead costs of $200,000, what is its predetermined overhead rate? Answer:200% of direct labor cost.