ECONOMICS

Detailed explanation-1: -To calculate the overhead rate, divide the indirect costs by the direct costs and multiply by 100. If your overhead rate is 20%, it means the business spends 20% of its revenue on producing a good or providing services. A lower overhead rate indicates efficiency and more profits.

Detailed explanation-2: -The formula for calculating a company’s overhead is as follows. Overhead Cost = Indirect Materials + Indirect Labor + Indirect Expenses. An overhead cost can be categorized as either indirect materials, indirect labor, or indirect expenses.