Concept Introduction Manufacturing Overhead: Manufacturing overhead refers to indirect costs that are incurred in the factory, other than direct materials costs and direct labor costs. Some of the examples of manufacturing overhead are depreciation on manufacturing plant and equipment, property taxes on plant, plant janitor’s wages etc. Predetermined Overhead Allocation Rate: A predetermined overhead allocation rate is used to assign the indirect manufacturing overhead costs to the units of production. It is computed by dividing the estimated overhead cost by an estimated quantity of allocation base. Allocation Base: An allocation base is used to allocate the indirect overhead costs. For example: Direct labor hours, machine hours, direct labor cost etc. Departmental Overhead Allocation Rate: It is computed by dividing the estimated departmental overhead cost by an estimated quantity of allocation base used for that department. 1. To Compute: The predetermined overhead allocation rates using machine hours as the allocation base for the Assembly Department and direct labor hours for the Packaging Department.

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Chapter 24, Problem E24.15E

To determine

Concept Introduction

Manufacturing Overhead: Manufacturing overhead refers to indirect costs that are incurred in the factory, other than direct materials costs and direct labor costs. Some of the examples of manufacturing overhead are depreciation on manufacturing plant and equipment, property taxes on plant, plant janitor’s wages etc.

Predetermined Overhead Allocation Rate: A predetermined overhead allocation rate is used to assign the indirect manufacturing overhead costs to the units of production. It is computed by dividing the estimated overhead cost by an estimated quantity of allocation base.

Allocation Base: An allocation base is used to allocate the indirect overhead costs. For example: Direct labor hours, machine hours, direct labor cost etc.

Departmental Overhead Allocation Rate: It is computed by dividing the estimated departmental overhead cost by an estimated quantity of allocation base used for that department.

1.

To Compute: The predetermined overhead allocation rates using machine hours as the allocation base for the Assembly Department and direct labor hours for the Packaging Department.

To determine

2.

To Compute: The overhead cost that is allocated to the basic model.

To determine

3.

To Compute: The overhead cost that is allocated to the professional model.

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