Lecture 3

Question 1

What is the basic formula for unit costs?

Answer 1

Unit cost = Total manufacturing cost/Total units produced

Question 2

Whats the equation for predeterminded overhead rate (POHR) ?

Answer 2

POHR =

Estimated total manufacturing overhead cost for the coming period

Estimated total units in theallocation base for the coming period

Question 3

whats the equation for overhead applied?

Answer 3

Overhead applied = POHR × Actual activity

Actual activity means the Actual amount of allocation base used to do overhead allocation (e.g., direct labour hours, machine hours)

Question 4

what is over applied overhead?

Answer 4

Over-applied overhead (or over-absorbed overhead) occurs when the overhead cost recovered or applied (using a predetermined overhead cost rate) is greater than the actual overhead cost of the period.

Question 5

what is over absorbed overhead?

Answer 5

Over-applied overhead (or over-absorbed overhead) occurs when the overhead cost recovered or applied (using a predetermined overhead cost rate) is greater than the actual overhead cost of the period.

Question 6

what is under applied overhead?

Answer 6

Under-applied overhead (or under-absorbed overhead) occurs when the overhead cost recovered or applied (using a predetermined overhead cost rate) is less than the actual overhead cost of the period.

Question 7

what is or under-absorbed overhead overhead?

Answer 7

Under-applied overhead (or under-absorbed overhead) occurs when the overhead cost recovered or applied (using a predetermined overhead cost rate) is less than the actual overhead cost of the period.