Principles of Managerial Accounting · free preview
The Predetermined Overhead Rate and Applying Overhead
Overhead is applied to jobs using a predetermined rate computed before the period begins, dividing estimated annual overhead by the estimated allocation base activity, so jobs absorb overhead as the base is consumed.
1. Why overhead is predetermined
Why overhead is predetermined
2. Computing the rate
Computing the rate
3. Applying overhead to jobs
Applying overhead to jobs
4. Choosing the allocation base
Choosing the allocation base
5. Rate formula
How is the predetermined overhead rate computed?
6. Rate computation
Estimated annual overhead is 480,000 dollars and estimated activity is 60,000 machine-hours. Compute the predetermined overhead rate.
7. Applied overhead computation
The rate is 8 dollars per machine-hour and a job uses 500 machine-hours. Compute applied overhead for the job.
8. Base selection principle
What should guide the choice of allocation base?
9. Rate timing
The predetermined overhead rate is computed ____ the period begins. One word.
10. Job sheet completion
A job cost sheet is complete for pricing when it holds direct materials, direct labor, and applied ____. One word.
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