What is the calculation for the G&A overhead rate?

• A. Direct Labor Base / G&A Expenses
• B. G&A Expenses / Total Labor
• C. G&A Expenses / Direct Labor Base
• D. Indirect Costs / Direct Materials

Answer: (C)

G&A overhead rate shows how much general and administrative cost to allocate for each unit of the chosen activity base. The standard way is to divide the total G&A expenses by the direct labor base, producing a rate that can be applied to products or jobs to assign overhead. The direct labor base is a common driver because many overhead costs scale with labor activity, making this base a sensible way to link overhead to production effort. For example, if G&A expenses are 120,000 and the direct labor base is 100,000 dollars of direct labor, the rate is 1.20 per dollar of direct labor (or per direct labor hour if you’re measuring it that way). Using the inverse (base divided by G&A) would not yield a useful rate, and using total labor or direct materials as the base would misalign overhead allocation with how these costs actually accumulate.