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What is a predetermined overhead rate? Author: Harold Averkamp, CPA, MBA Definition of Predetermined Overhead Rate A predetermined overhead rate is often an annual rate used to assign or allocate indirect manufacturing...

or allocated to the products manufactured. This is often done by using a predetermined overhead rate. The predetermined rate is likely based on the amount from the annual manufacturing overhead budget divided by some...

costs? What is practical capacity? What does stepped cost mean? What are net incremental cash flows? What is the production volume variance? What is a BOM? What is theoretical capacity? What is a product cost? What is...

The actual cost of direct materials, the actual cost of direct labor, and manufacturing overhead applied by using a predetermined annual overhead rate.

is the coefficient of determination? What is a predetermined overhead rate? What is a burden rate in inventory? Is a utility bill an expense? Isn't all overhead fixed? How do you determine the fixed portion of...

overhead (supervisors’ compensation, depreciation, etc.) for the upcoming year. During that year, it expects to have 30,000 production machine hours of good output. Based on this, the manufacturer established a...

Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...

Rates based on a department’s direct and indirect overhead costs and some measure of the department’s activity, such as the department’s machine hours. Departmental rates are more accurate than...

through an overhead rate. We also state that the products absorb the overhead costs through the overhead rate. The overhead rate is normally a predetermined rate?meaning that it was calculated prior to the start of the...

A single overhead rate for assigning all of the manufacturing production and service department costs to products. This rate is less accurate than departmental rates if a company manufactures a diverse group of...

, and fixed manufacturing overhead. Accountants will state that the goods produced must absorb the fixed manufacturing overhead costs. It is common that the fixed manufacturing overhead costs are absorbed by the goods...

in a standard cost system? Efficiency Right! Rate Wrong. Rate is used interchangeably with price. Spending Wrong. Spending is the price variance associated with variable manufacturing overhead. 11. Which of the...

What is a plant-wide overhead rate? Author: Harold Averkamp, CPA, MBA Definition of Plant-wide Overhead Rate A plant-wide overhead rate is often a single rate per hour or a percentage of some cost that is used to...

Direct labor: a standard quantity of labor and a standard cost per hour of labor Manufacturing overhead: a budget for the fixed overhead, the standard variable overhead rate, and the standard quantity for applying a...

The fixed manufacturing costs (e.g., property tax, rent, and depreciation on factory) that have been assigned to (absorbed by) the products manufactured via a predetermined rate. Ideally, by the end of the accounting...

The variable manufacturing costs other than direct materials and direct labor that have been assigned to the products manufactured via a predetermined rate. Ideally, by the end of the accounting year the amount applied...

rate. The reason for departmental overhead rates is that manufacturers are likely to produce many diverse products which use different processes in different departments and each has different costs. Example of...

What is a burden rate in inventory? Author: Harold Averkamp, CPA, MBA I assume that the burden rate in inventory refers to a manufacturer’s indirect manufacturing costs, which are also referred to as factory overhead,...

Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...

Our Explanation of Activity Based Costing illustrates how manufacturing overhead costs for a product will differ when costs are allocated using only the number of machine hours, as opposed to being allocated using the...

Manufacturing overhead assigned to units of output. Often this is applied via a standard overhead rate. See the Explanation of Standard Costing.

Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...

has increased as a percentage of product costs during the past 80 years. True Right! False Wrong. 12. The use of a plant-wide rate will be more equitable than the use of departmental rates for allocating manufacturing...

The interest rate stated on a bond. This is also referred to as the face interest rate, nominal interest rate, and coupon rate.

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Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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