
Concept explainers
What are the three common approaches for assigning

Concept Introduction:
Predetermined overhead allocation:
Manufacturing overhead cost is the pool of all indirect costs incurred for the production. These are the costs which are not directly traceable to the product. Manufacturing costs include indirect material, indirect labor and overheads. These costs are allocated to the products using the predetermined overhead allocation rate.
Activity Based Costing (ABC):
ABC costing method is generally used to allocate the overhead costs to the product using activity rates differently for each activity. Unlike traditional method, the ABC costing method does not use the plant wide overhead rate, rather it used different allocation rate for different production activity.
To Indicate:The three common approaches to assign the overhead costs
Answer to Problem 1Q
The three common approaches to assign the overhead costs are as follows:
1. Predetermined overhead allocation
2. Volume based allocation
3. Activity based costing
Explanation of Solution
The three common approaches to assign the overhead costs are as follows:
1. Predetermined overhead allocation: Under this approach the entire manufacturing overhead is allocated to the production using a single overhead rate.
2. Volume based allocation: Under this approach the entire manufacturing overhead is allocated to the production using the number of units as base.
3. Activity Based Costing: Under this approach the entire manufacturing overhead is first dividend into the different production activities and then each activity cost is allocated to the production using the appropriate allocation for that activity.
Want to see more full solutions like this?
Chapter 4 Solutions
Introduction To Managerial Accounting
Additional Business Textbook Solutions
Intermediate Accounting (2nd Edition)
Horngren's Accounting (12th Edition)
Essentials of MIS (13th Edition)
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
Engineering Economy (17th Edition)
- Below is information for Blue Company. Using this information, answer the following questions on the "Calculation" tab in the file. Show your work (how you got your answer) and format appropriately. Blue company has prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 to 1,500 units): Sales $ 40,000 Variable expenses 24,000 Contribution margin 16,000 NOTE: Use the amounts in the original fact pattern to the left as your basis for the questions below. Fixed expenses 12,000 Net operating income $ 4,000 Questions: 1. What is the contribution margin per unit? 2. What is the contribution margin ratio? 3. What is…arrow_forwardI am looking for help with this financial accounting question using proper accounting standards.arrow_forwardGeneral accountingarrow_forward
- Please explain the correct approach for solving this general accounting question.arrow_forwardRobin Corporation has ordinary income from operations of $30,000, net long-term capital gain of $10,000, and net short-term capital loss of $15,000. What is the taxable income for 2010? a) $25,000. b) $27,000. c) $28,500. d) $30,000. e) None of the above.arrow_forwardPlease explain the solution to this financial accounting problem using the correct financial principles.arrow_forward
- I need the correct answer to this financial accounting problem using the standard accounting approach.arrow_forwardI am trying to find the accurate solution to this general accounting problem with the correct explanation.arrow_forwardI need help with this financial accounting question using the proper financial approach.arrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegePrinciples of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning


