Example in mis allocation of overhead



                              Example 4



Given the following information about Nona factory:

1-budgeted factory overhead is 65000$

2-budgeted allocation base is 14000 machine hours

3-actual factory overhead is 70,000$




Job 10 is sold, job 20 is completed but not yet sold, job 30 is still in process

Required

1-prepare cost sheet for the 3 job orders

2-compute over or under allocated overhead


The solution:

the budgeted overhead rate = budgeted factory overhead / budgeted allocation base =

65000$ / 14000 m.hrs. = 4.64$/m.hrs

1-the cost sheet:





2- Actual overhead = 65000$

Applied overheads =
11600 + 16240 + 20880 = 48720$

So, it is under allocated or applied as actual overhead is higher than the applied overhead















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