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Tag Archives: Factory Overhead

Responsibility for Direct Materials and Direct Labor

direct materials and direct labor

Responsibility for Direct Materials and Direct Labor. Basically, the best approach to assigning responsibility for any cost element is a study of those individuals who are in the most favored position to keep the costs under control. Direct material and direct labor costs are clearly traceable to the products being produced. Manufacturing overhead consists of indirect factory related costs and therefore, must be divided up and allocated to each unit of product produced. The assignment of responsibility for overhead expenses to foremen, supervisors, and department heads allows a conceivable amount …

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Calculation Of Manufacturing Overhead Rate

manufacturing overhead rate | net defined benefit liability

The determination of the manufacturing overhead rate follows the procedures discussed in the previous manufacturing   overhead rate discussion. The overhead rate based on machine hours or costs assumes that overhead costs are proportional to machine hours. Now we are going to learn some basic steps in determining the manufacturing overhead rate: 1. Costs of any service or maintenance department are estimated or budgeted according to their nature (supervision, supplies, electricity, etc.). 2. Costs are classified as fixed or variable. This classification often leads to the realization that many service departmental …

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Year-end Departmental Expense Analysis Sheet

Expense Analysis Sheet | measurement of fair value

Departmental Expense Analysis Sheet: Departmentalization of factory overhead requires that each expense be charged to a department as well as to a specific expense account. Such charges are collected on departmental expense analysis sheet. This form, used for both producing and service departments, is partially reproduced above. In this form, each column represents a certain class of factory over-head that will be charged to the department. For example, the column coded 411 represents supervisors and foremen, 412 represents indirect labor, and so forth. Entries to departmental expense analysis sheet are …

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How To Calculate Predetermined Overhead Rate

limitations of activity based costing and predetermined overhead rate

The illustration uses four producing departments here such as Cutting, Planing, Assembly, and Upholstery; and four service departments: Materials Handing, Inspection, Utilities, and General Plant. The total estimated overhead prepared has now been departmentalized, but under the account classification described above and with a slight modification of figures for ease to calculate predetermined overhead rate. The fixed-variable cost classification has been retained. Its purpose will be explained. The establishment of predetermined overhead rate for departmentalized factory operations proceeds in the following manner: 1 . Estimate or budget total direct factory …

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Process Of Establishing Departmental Overhead Rates

departmental overhead rates

ESTABLISHING DEPARTMENTAL OVERHEAD RATES: Factory overhead is usually applied on the basis of direct labor dollars or hours when one factory overhead rate is used for the entire plant, since this procedure is considered most convenient and acceptable. The use of departmental overhead rates require a distinct consideration of each producing department’s overhead which often results in the use of different bases for applying overhead for different departments. For example, it is possible to use a direct labor hour rate for one department and a machine hour rate for another. …

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Which are General Factory expenses and Janitor Labor expenses?

shadow accounting

General Factory expenses: Certain expenses other than those discussed above come under the category General Factory expenses because they cannot be identified directly with any specific producing or service department. Therefore, a separate general plant cost center or department is established to accumulate and control such expenses. Such a department is usually the direct responsibility of the plant superintendent. Salaries of management personnel directly concerned with production are charged to this department if they cannot be charged to specific departments except by arbitrary allocations. Janitor labor and supplies may be …

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Basis of Charging Indirect Expenses to Producing Departments

accounting for indirect expenses | uses of cost data | essentials of a good information system

Apart from Expenses, Indirect Expenses such as power, light, rent, and depreciation of factory, when shared by all departments, can understandably not be charged directly to a department, be it producing or service. These indirect expenses do not originate with any specific departments. They are incurred for all to use and therefore, be prorated to any or all departments using them. The selection of fair bases for such distributions requires careful study. Selecting appropriate bases for the distribution of these indirect expenses or  general factory costs is difficult and in …

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Charging Repairs and Maintenance Costs to Products

characteristics of fair value accounting

Repairs and Maintenance costs: With respect to repairs and maintenance costs, it is essential (1) to establish control over the total cost incurred by the repairs and maintenance department and (2) to devise effective means for charging repairs and maintenance costs to departments receiving the service. As a rule, the work of repair and maintenance crews is supervised by a maintenance superintendent. If possible and practical, all actual repairs and maintenance costs should be charged to a maintenance department so that the total cost is controlled by the maintenance superintendent …

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Difference Between Direct And Indirect Materials

importance of standard costing | direct and indirect materials

Indirect Materials and Factory Supplies. Distinguishing incorrectly between direct and indirect materials (the latter being part of overhead) has the same adverse effects on product costing as failure to make proper distinction between direct and indirect labor. However, distinguishing between direct and indirect materials is usually not so difficult. In a manufacturing operation, direct materials are those which are changed in form through processing, machining, etc., and become an integral part of the end product. Indirect materials, often referred to as factory supplies, are auxiliary to the processing or machining …

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How To Categorize Direct Departmental Overhead Costs

disadvantages of backflush costing | option pricing models | equity instruments | departmental overhead costs

Direct departmental overhead costs: Inasmuch as overhead is allocated to all products, a lax or incorrect classification results in direct labor applying to only one product being allocated as indirect labor in the form of overhead to other products, thereby understating the one product cost and overstating the others. The majority of direct departmental overhead costs can be categorized as follows: 1. Supervision, indirect labor, and overtime 2. Labor fringe benefits 3. Indirect materials and factory supplies 4. Repairs and maintenance 5. Equipment depreciation These expense categories are generally readily …

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