FOH-FM - Presented by Flonia Elmira Khierkhah Factory over...

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Presented by :  Flonia  Elmira Khierkhah 
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Factory over head standard Predetermined  amount  of  FOH  should  go  into  production of one finished unit .  The concept of standard setting is similar to standard  setting for direct material and direct labor . The  procedure  to  compute  standard  cost  is  different  because  the  variety  of  items  comprising  the  factory  overhead cost pool . Because  of  the different items included in the  FOH  ,  the setting of FOH standard involves many individuals  within the company 
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Factory over head standard When preparing FOH cost estimate for the next period ,  assumptions  must  be  made  about  changes  in  the costs  as  a  result  of  inflation  ,  technological  advance and policy decisions regarding production standard or objectives. Budgeting FOH costs requires careful analysis of past experience , expected economy condition … in order to arrive at the best possible prediction of next period  FOH cost .
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Factory over head standard When  determined  a  standard  product  costs,  FOH  is  separated to : variable costs   Fixed costs       can be assign to products over a  can be assign to products over a  wide range of activity level wide range of activity level     will remain constant over different will remain constant over different  activity level with in the  activity level with in the  relevant range,   relevant range, 
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Budgets used in Factory over head standard Budget  are  commonly  used  in  the  controlling  FOH  costs.   Actual Factory overhead costs are later compared with  the budget to evaluate the managerial performance .  Two used budgeting approaches are: static and flexible  budgets.
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Factory over head standard Static budget : shows  the anticipated cost at a one level of activity. Production  level  usually  fluctuates  in  response  to fluctuations in customer demand. If a static budget used and actual production differ from planned production ,an accurate  cost  comparison  can  not  be  made  because part  of  difference  between  actual  and  standard  cost  is the result of a change in the level of production , in this case static budget cannot explain.
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Example Projected activity level (in direct labor hours)……………………………           6,000   Variable factory overhead costs :  Indirect material ……………………………………………………………………             $   600  Indirect labor ……………………………………………………………………….                 3,000  Repairs ………………………………………………………………………………. .                 1,200
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This note was uploaded on 06/30/2011 for the course ECO 4701 taught by Professor Ahmed during the Spring '11 term at Andhra University.

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FOH-FM - Presented by Flonia Elmira Khierkhah Factory over...

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