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What is the difference between absorption costing and direct costing?
Under absorption costing overheads are allocated to production based on predetermined overhead rates like machine hours, or direct labor hours etc while in direct costing overheads are allocated based on activity performed and relationship with production units.
What are the three overhead absorption rates?
As far as I know there is only an overhead absorption rate and a full absorption rate. The alternative being marginal costing. There are 3 methods of absorption costing. These being Activity, Time and Efficiency but I'm not sure what you are asking exactly.
Why is it considered preferable to use a separate overhead absorption rate opposed to one overall rate for all departments?
Since costs are different from all products assigning overhead absorption rates will impact the price of the products. A specific rate for each product will help the company compete within the industry.
What is the role of a cost accountant in the business organization?
Cost accountants are responsible for establishing budgets for the organization. They also assign predetermined overhead rates for product, so that the business doesn't take a loss when they sell the product.
How do you determine multiple production department factory overhead rates?
To determine multiple production department factory overhead rates, first, identify the total overhead costs for each department and the appropriate allocation base, such as machine hours or labor hours. Next, gather data on the actual usage of the chosen allocation base for each department. Finally, divide the total department overhead costs by the total units of the allocation base to calculate the overhead rate for each department. This approach ensures that costs are accurately assigned based on the specific activities and resources utilized in each department.
What are the advantages of using predetermined overhead rates?
The benefits of using predetermined overhead rates is that budgeting and allocation of cash flows become easier. It also helps the firm to conserve resources to stay within a budget.
How is predetermined overhead rates useful in costing?
It allows you to forecast future costs needed to do business.
What is the difference between absorption costing and direct costing?
Under absorption costing overheads are allocated to production based on predetermined overhead rates like machine hours, or direct labor hours etc while in direct costing overheads are allocated based on activity performed and relationship with production units.
What are the three overhead absorption rates?
As far as I know there is only an overhead absorption rate and a full absorption rate. The alternative being marginal costing. There are 3 methods of absorption costing. These being Activity, Time and Efficiency but I'm not sure what you are asking exactly.
Departmental overhead absorption rate?
The benefit of determining overhead absorption rates, according to departments is that it is usually hard to pin certain overhead costs to specific products. It is better for each department to relate to a certain overhead than a specific product.
It is better to use multiple overhead rates compared to single rate in overhead absorption Discuss statement?
hope u all can help me about this question
WHAT IS Fixed moh?
Fixed MOH stands for fixed manufacturing overhead. It includes overhead costs that do not vary with production levels, such as rent on the manufacturing facility or management salaries. Fixed MOH is allocated to products based on predetermined rates or cost drivers.
Why is it considered preferable to use a separate overhead absorption rate opposed to one overall rate for all departments?
Since costs are different from all products assigning overhead absorption rates will impact the price of the products. A specific rate for each product will help the company compete within the industry.
What are departmental overhead rates?
Departmental overhead rates are an expense assigned to products associated with a particular department. Overhead rates help businesses remain within the boundaries of a budget.
What is the role of a cost accountant in the business organization?
Cost accountants are responsible for establishing budgets for the organization. They also assign predetermined overhead rates for product, so that the business doesn't take a loss when they sell the product.
Why pre-determined overhead absorption rates are prefered to overhead absorption rates calculated from factual information after the end of a financial period?
Cost of Production: The most important use is Calculation of production cost. Overhead is a cost and thererfore it is one of the determining factors of overheads. For calculation of cost of production (actual) which will be reflected into the Books of account for the year end we will take into account the factual costs but as far as pricing the produced goods and giving quotes to customer we will need to bank upon the predetermined overhead absorption rates.Guidelines for the Production Department: The production department is one of the major cost centres for any manufacturing company and overheads is a major expense in that department. Proper management of expenses is very important for any organisation to succeed. As overhead is a highly variable cost it is very important to lay a guideline for the production department as to what the management expects them to expend on overheads. It serves as a benchmark and then it lays in the hands of the production employees as to how carefully they manage their expenses on overheads as to remain in lines with management expectations. A certain degree of variance due to uncontrollable factors like rise in electricity charges, rents, rates etc is always tolerated but other expenses which can be controlled need to be properly in line with budgetary allowance. A wider difference between predetermined costs and actual expenditure will lead to differences in the profitability of the company.Selling Price Calculation: The prime reason for it being that the actual price of supplying the goods to any customer is determined when an order is placed with us, at that point of time the goods have not been produced hence factual rates are not available for us. The selling price of any goods is equal to Cost plus profit. We can exactly calculate how much profit we anticipate but the cost for any goods not produced cannot be ascertained exactly hence the predetermined rates are used. No customer will ever wait for us till the year end so as to provide him with actual supply price for goods supplied to him at an earlier stage.
Why are certificate of deposit interest rates so high?
Banks pay you a premium interest rates for leaving your money untoched for a predetermined amount of time.
