Types of Overhead Absorption Rate

NB: Overheads incurred are generally absorbed on the basis of budgeted or estimated figures. The given basis may be applied leading to the specified types of rates.

1. Percentage of direct material cost = (overhead cost / Direct material cost)x 100
2. Percentage of direct labour cost = (overhead cost/Direct labour cost) x 100
3. Direct prime cost = (overhead cost/Prime cost) x 100
4. Labour hours = overhead cost/Labour hours
5. Units of output = overhead cost/Units of output