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. The formula of predetermined overhead allocation rate is as follows: Predetermined overhead allocation rate = Estimated Manufacturing overhead Cost Allocation base The overhead applied on the basis of predetermined overhead allocation may result in over or under application of the overhead. If the overhead applied is more than the actual overhead cost, then it shall be called over applied overhead. If the overhead applied is less than the actual overhead cost, then it shall be called under applied overhead. To calculate: Total Under or over applied fixed manufacturing overhead.

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Chapter 9, Problem 2.3GBP

To determine

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. The formula of predetermined overhead allocation rate is as follows:

Predetermined overhead allocation rate = Estimated Manufacturing overhead CostAllocation base

The overhead applied on the basis of predetermined overhead allocation may result in over or under application of the overhead. If the overhead applied is more than the actual overhead cost, then it shall be called over applied overhead. If the overhead applied is less than the actual overhead cost, then it shall be called under applied overhead.

To calculate:

Total Under or over applied fixed manufacturing overhead.

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