A fixed overhead will remain the same regardless of production levels while a variable overhead will change in relation to production levels. Controlling Overheads will reduce per unit costs thereby increasing contribution margin.
The items which are included in direct overheads are the ones which are directly related to production process like salaries of machine operators and buying raw materials. The ones that are included in indirect overheads do not relate to production like giving to charity among others.
Variable overhead cost variance is that variance which is in variable overheads costs between the standard cost and the actual variable cost WHILE fixed overheads cost variance is variance between standard fixed overhead cost and actual fixed overhead cost.
marginal costing considers only direct) materials,labour,expenses and variable factory overheads excluding fixed factory overheads but absorption considers (direct) materials ,labour,expenses,variable and fixed factory overheads.
In traditional costing, overheads are allocated using blanket rate while in activity based costing overheads are allocated by the activities performed.
Management overheads refer to costs that are not directly related to the production process, but to the business/company as a whole. Examples are: IT expenses, human resource management, insurance, salary of managing director. The annual company registration fee is also part of management overheads.
1.11.5 By Controllability- Costs here may be classified into controllable and uncontrollable costs. (a) Controllable costs - These are the costs which can be influenced by the action of a specified member of an undertaking. A business organisation is usually divided into a number of responsibility centres and an executive heads each such centre. Controllable costs incurred in a particular responsibility centre can be influenced by the action of the executive heading that responsibility centre. For example, Direct costs comprising direct labour, direct material, direct expenses and some of the overheads are generally controllable by the shop level management. (b) Uncontrollable costs - Costs which cannot be influenced by the action of a specified member of an undertaking are known as uncontrollable costs. For example, expenditure incurred by, say, the Tool Room is controllable by the foreman incharge of that section but the share of the tool-room expenditure which is apportioned to a machine shop is not to be controlled by the machine shop foreman The distinction between controllable and uncontrollable costs is not very sharp and is sometimes left to individual judgement. In fact no cost is uncontrollable; it is only in relation to a particular individual that we may specify a particular cost to be either controllable or uncontrollable
Non production overheads are costs associated with the workings of a company. These costs do not go directly into making the item. For example, electricity or office space are non production overheads.
The items which are included in direct overheads are the ones which are directly related to production process like salaries of machine operators and buying raw materials. The ones that are included in indirect overheads do not relate to production like giving to charity among others.
Variable overhead cost variance is that variance which is in variable overheads costs between the standard cost and the actual variable cost WHILE fixed overheads cost variance is variance between standard fixed overhead cost and actual fixed overhead cost.
As one looks at contribution margin (effectively a product's/service's financial contribution to the organization before overheads and other company-based costs), there are two things that can be done for improvement: * Cutting costs (e.g., reducing costs of production, reducing scrap loss, increasing production efficiency, automation, etc.) * Increasing sales (e.g., raising prices, increasing demand, expanding market area, etc.)
yes.
Over or Under AbsorptionNote that as long as planned level of activity and the actual level of activity is not the same there is always an Over or Under Absorption situationThis is because overhead absorption rate is set at the start of the period based upon an expected level of production and that during the period, the level of output and or overheads will be different from the planned overheads and or output.OVER-absorption occurs when the total overhead recovered or absorbed is GREATER than the actual level of overheads for the period.UNDER-absorption occurs when the total overheads recovered or absorbed is LESS than the actual overheads incurred in the period.
Low overheads and diversity of products
marginal costing considers only direct) materials,labour,expenses and variable factory overheads excluding fixed factory overheads but absorption considers (direct) materials ,labour,expenses,variable and fixed factory overheads.
Over or Under AbsorptionNote that as long as planned level of activity and the actual level of activity is not the same there is always an Over or Under Absorption situationThis is because overhead absorption rate is set at the start of the period based upon an expected level of production and that during the period, the level of output and or overheads will be different from the planned overheads and or output.OVER-absorption occurs when the total overhead recovered or absorbed is GREATER than the actual level of overheads for the period.UNDER-absorption occurs when the total overheads recovered or absorbed is LESS than the actual overheads incurred in the period.
materials, labour and overheads
It is the wholesale price plus a share of the overheads.