Week 7 - Job Order Costing Accounting and Overhead Allocation and Apportionment II Flashcards
1
Q
What is the formula for the predetermined overhead rate (POHR)
A
Estimated total manufacturing overhead cost for the coming period / estimated total units in the allocation base for the coming period
2
Q
Ideally the allocation base is…
A
A cost driver that causes overhead
3
Q
What is the formula for overhead applied?
A
Overhead applied = POHR x actual activity
4
Q
What is the ‘actual activity’?
A
The actual amount of the cost driver such as units produced, direct labour hours, or machine hours incurred during the period
5
Q
Why do we use a predetermined overhead rate?
A
It makes it possible to estimate total job costs sooner, as actual overhead for the period is not known until the end of the period
