{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter 3 PPT - Cost Accounting Foundations and Evolutions...

Info icon This preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 3 Predetermined Overhead Rates, Flexible Budgets, and Absorption/Variable Costing Cost Accounting Foundations and Evolutions Kinney, Prather, Raiborn
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Learning Objectives (1 of 3) Explain why and how overhead costs are allocated to products and services Describe what causes underapplied or overapplied overhead and how is it treated at the end of the period
Image of page 2
Learning Objectives (2 of 3) Explain how different capacity measures affect predetermined overhead rates Explain how managers use flexible budgets to set predetermined overhead rates
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Learning Objectives (3 of 3) Contrast absorption and variable costing Describe how changes in sales or production levels affect net income under absorption and variable costing
Image of page 4
Allocating Overhead Actual vs. Normal Product Cost Direct Materials Direct Labor Overhead Actual Cost System Actual Actual Actual Normal Cost System Actual Actual Predetermined Overhead Rate
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Predetermined Overhead Rate Allows overhead to be assigned during the period, fulfilling the matching principle Allows managers to be aware of product, product line, customer, and vendor profitability
Image of page 6
Predetermined Overhead Rate A budgeted, constant charge per unit of activity used to assign overhead to production or services
Image of page 7

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Predetermined Overhead Rate Total budgeted overhead Activity level (Volume) = Predetermined Overhead Rate $100,000 5,000 DL Hours = $20 per DL Hours
Image of page 8
The Activity Level (The Denominator) Relationship between the overhead cost and the activity production volume direct labor hours direct labor cost machine hours number of purchase orders or parts machine setups material handling time
Image of page 9

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Predetermined Overhead Rate Total budgeted variable overhead Activity level (Volume) $375,000 50,000 machine hours = $7.50 per machine hour Total budgeted fixed overhead Activity level (Volume) $630,000 50,000 machine hours = $12.60 per machine hour
Image of page 10
Applying Variable Overhead Actual
Image of page 11

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern