Академический Документы
Профессиональный Документы
Культура Документы
components Define and calculate overhead rates Accumulate actual factory overhead costs Apply factory overhead using predetermined rates Dispose of over or underapplied factory overhead
2
Base to Be Used
Ordinarily the base should be closely related to functions represented by the overhead cost being applied.
If overhead is mostly labor oriented (costs of supervision and fringe benefits), then the proper base is probably direct labor cost or direct labor hours.
When two or more bases result in approximately the same applied factory overhead costs for each job or product, the simplest, most easily measured base should be used.
9
Physical Output
Physical output or units of production is the simplest base for applying factory overhead
Estimated Factory Overhead = Factory Overhead per unit Estimated units of production
Example: If Estimated Factory overhead is $300,000 and the company intends to produce 250,000 units during the next period, then the FOH per unit is charged $1.2 ( $ 300.000 : 250.000 units). Then an order with 1,000 completed units, is charged 1,000 x $1.2 = $1,200 of Factory Overhead
The physical output base is satisfactory when a company manufactures only one product, or if the products are alike or closely related; otherwise, the method is generally unsatisfactory.
10
Example:
If Estimated Factory overhead totals $300,000 and est. materials cost $250.000, then the FOH rate is $300,000 : $250,000 = 1.2 or 120 % of its direct materials cost. So, if the materials cost for an order is $5,000, Factory Overhead charged to the order would be $5.000 x 1.2 = $6,000
The material cost base is of limited use, because in most cases no logical relationship exists between the direct materials cost of a product and the use or creation of factory overhead in its production
11
Example:
If Estimated Factory overhead is $300,000 and total direct labor cost is estimated at $500,000, then FOH rate is $300,000 : $500,000 = 0.6 or 60 %. So, a job or product with a direct labor cost $12,000 is charged $12.000 x 60% = $7,200 for Factory Overhead.
12
Example:
If estimated Factory overhead totals $300,000 and direct labor hours are est. 60,000, then factory overhead rate is ($300.000 : 60,000) = $5 per direct labor hour A job with 800 DLH, is charged 800 x $5 = $4,000 for factory overhead
Recent years have seen a shift away from direct labor usage and toward increasing levels of automation. As a result, a direct labor hours base for overhead application has become less appropriate, often giving way to machine hours as the preferred base.
13
Example:
If estimated factory overhead totals $300,000 and a total of 20,000 machine hours are estimated, the FOH rate is $300,000 : 20,000 machine hours (MH) = $15 per MH So, a job or product that requires 120 machine hours is charged 120 x $15 = $1,800 for Factory Overhead
14
Transaction Base
The transaction-base approach to transactionoverhead allocation is popularly referred to as activity-based costing (ABC) and is activitydiscussed in detail in Chapter 14.
15
Practical Capacity
It is improbable that any company can operate at theoretical capacity. Allowances must be made for unavoidable interruptions (maintenance, material delays, holidays, etc). s, Those factors reduce theoretical capacity to the practical capacity.
16
Normal Capacity
It corresponds to the average activity over a time period long enough to level out the highs and lows
17
Direct Costing
Only variable factory overhead is included in overhead rates.
19
for the base selected. 2. Estimated or budgeted each individual overhead cost item at that activity level
total estimated factory overhead.
Factory Overhead rate = Estimated Factory Overhead cost Estimated activity level base
20
$175,000 est. variable FOH = $8.75 Variable portion of FOH 20,000 est. machine hours Total FOH Rate = $15.00 per machine hours
21
24
Overhead applied
25
Overapplied:
FOH applied > FOH Control
(FOH Control has credit balance)
No
Yes
Close To COGS
27
8,500 8,500
If factory overhead had been overapplied, the two inventories and COGS would be credited and Factory Overhead Control would be debited.
31
32
33
34
35
36
37
38
39
- The End -
40