This question doesn't make sense. Please clarify.
Managers compare the actual line item amounts for manufacturing overhead with the budgeted amounts. Managers investigate large differences between actual and budgeted amounts to identify the reasons why actual costs differ from planned or budgeted costs.
Many companies will have a 'historical' OVHD rate, or calculate a budgeted rate.Presuming budgeted or est-ovhd cost of 750,000Presuming budgeted or est-direct-labor 500,000Overhead rate = estimated overhead costs/estimated activity base750,000 / 500,000Overhead rate =1.5 or 150%Since job-labor is the basis for Applied Overhead,Applied overhead = rate from above x actual direct labor.1.5 510,000Applied overhead = 765Prorate the overhead variance to the appropriate accounts765 - 750 = variance of 15K
Actual Costs are costs which have occurred and can be reliably measured. Budgeted Costs are costs which have been estimated, possibly by using Forecasted Costs.
Some budgeted costs are based on actual costs of the previous year, information from supervisors about where resources might be more efficiently used, and subjective judgments about how much should be allowed for resources.
it doens't
Managers compare the actual line item amounts for manufacturing overhead with the budgeted amounts. Managers investigate large differences between actual and budgeted amounts to identify the reasons why actual costs differ from planned or budgeted costs.
the reason was: control the budget,
Predetermined overhead rate based on direct labor cost = Budgeted overhead cost / direct labor cost / 100 Predetermined overhead rate based on direct labor cost = budgeted overhead cost / direct labor hours.
Many companies will have a 'historical' OVHD rate, or calculate a budgeted rate.Presuming budgeted or est-ovhd cost of 750,000Presuming budgeted or est-direct-labor 500,000Overhead rate = estimated overhead costs/estimated activity base750,000 / 500,000Overhead rate =1.5 or 150%Since job-labor is the basis for Applied Overhead,Applied overhead = rate from above x actual direct labor.1.5 510,000Applied overhead = 765Prorate the overhead variance to the appropriate accounts765 - 750 = variance of 15K
Actual Costs are costs which have occurred and can be reliably measured. Budgeted Costs are costs which have been estimated, possibly by using Forecasted Costs.
The total budgeted costs in an indirect-cost pool divided by the total budgeted quantity of cost-allocation base. For example: Manufacturing overhead = 900.000 and 25.000 machine hours. --> 900.000/25.000 = 36 dollar per machine hour
Budgeted costs are generally described as the best estimate about what should be allowed for forthcoming activity.
Some budgeted costs are based on actual costs of the previous year, information from supervisors about where resources might be more efficiently used, and subjective judgments about how much should be allowed for resources.
it doens't
The manufacturing overhead budget show the expected manufacturing over head costs for the budget period. The budget distinguishes between variable and fixed overhead costs. Companies fluctuate with production volume on the basis of the following rates per direct labor hour: indirect materials $1.00, indirect labor $1.40, utilities $0.40, and maintenance $0.20. Thus, for 6,200 direct labor hours budgeted indirect materials are $6,200 (6,200 x $1), and budgeted indirect labor is $8,680 (6,200 x $1.40). The company recognizes that some maintenance is fixed. The amounts reported for fixed cost are assumed.
Overhead refers to the cost of a business in a particular period. Specifically, overhead points to fixed and indirect costs. They are non-labor costs. Non-labor costs are variable or fixed. Rent and salaries are examples of fixed costs. Advertising and supplies are variable costs.
Direct labor are not part of overhead costs and shown separately while indirect labor are part of overhead costs and included in overhead cost because those labor cannot be allocated separately or identifiable separately.