Using direct labor hours:
Overhead rate = Total Overhead Expenses /Direct labor hours
Using Machine hours:
Overhead rate = Total Overhead Expenses /Machine hours
Blanket overhead absorption rate is the rate used to allocate total overhead costs to number of produce units in traditional accounting system
because they have no life, also they predetmined pigs
In managerial accounting, a cost added on to the direct costs of production in order to more accurately assess the profitability of each product. Overhead costs are all costs that are not directly related to the production of the good to be sold. These include administrative salaries, the costs of the building or machinery, commissions to salespeople, and many other items. To allocate these costs, an overhead rate is applied that spreads the overhead costs around depending on how much resources a product or activity used. For example, overhead costs may be applied at a set rate based on the number of machine hours required for the product. In more complicated cases, a combination of several cost drivers may be used to approximate overhead costs.
The Actual overhead is calculated throughout the Production cycle for indirect cost associated to the production and the overhead costs applied is based on the fixed rate assigned against the machine or labour hours to be calculated for the difference b/w two are called under or over applied.
Using a predetermined rate makes itpossible to estimate total job costs sooner. Actual overhead for the period is notknown until the end of the period.
Blanket overhead absorption rate is the rate used to allocate total overhead costs to number of produce units in traditional accounting system
because they have no life, also they predetmined pigs
Predetermined overhead rate is that overhead rate calculated before start of production to allocate overhead costs to units of products by using some ratio in relation to some other cost like material cost or labor cost or labor hours etc.
In managerial accounting, a cost added on to the direct costs of production in order to more accurately assess the profitability of each product. Overhead costs are all costs that are not directly related to the production of the good to be sold. These include administrative salaries, the costs of the building or machinery, commissions to salespeople, and many other items. To allocate these costs, an overhead rate is applied that spreads the overhead costs around depending on how much resources a product or activity used. For example, overhead costs may be applied at a set rate based on the number of machine hours required for the product. In more complicated cases, a combination of several cost drivers may be used to approximate overhead costs.
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.
The Actual overhead is calculated throughout the Production cycle for indirect cost associated to the production and the overhead costs applied is based on the fixed rate assigned against the machine or labour hours to be calculated for the difference b/w two are called under or over applied.
Increase in overhead rate would have negative financial impact since its one of the cost under the income statement. Increased in overhead rate would lead to increase in costs, which eventually would lead to lower income. Sales - Direct material - Direct labor - Overhead = Profit
Overhead rate : Overhead rate = total overhead cost / direct labor OR Overhead rate = Total overhead cost / machine hours.
A blanket absorption rate is a single rate of absorption used throughout an organization's production facility and based upon its total production costs and activity. The use of a single blanket rate makes the apportionment of overhead costs unnecessary since the total production costs are to be used.
Using a predetermined rate makes itpossible to estimate total job costs sooner. Actual overhead for the period is notknown until the end of the period.
Blanket overhead rate is the computation of a single overhead rate for one whole factory. Overhead rate is the percentage you get when comparing total overhead expenses to total expenses.
Your credit score. It will determine IF you can get a reduced rate AND how low the rate can go.