This content explains the classification and costing of manufacturing overhead, detailing how these indirect costs are categorized based on their behavior and how predetermined overhead rates are computed using various allocation bases.
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accounting for factory overhead
classification of overhead the
classification of overhead
we have indirect materials
so your indirect expense italian items
now manufacturing overhead
not classifiable as indirect materials
or indirectly work
such as heat light and power for factory
rent on factory building depreciation
and maintenance of factory building
and factory equipment property taxes on
factory overhead costs are divided into
three categories
on the basis of their behavior
in relation to production
the categories are number one variable overhead
overhead
number two fix overhead and number three
variable factory overhead costs these
are the factory overhead costs
that vary in direct proportion
to the level of production
within the relevant range that is
the greater the number of units produced
the higher the total variable cost
so our behavior now variable factory
overhead is
directly uh directly performed
level of production meaning
the more production the more level of production
production
must matter and variable cost
the lesser the number of units produced
the lower
these are the factory overhead costs
that remain constant within the relevant
range regardless of the varying levels of
of
production the total remains
constant but the fixed cost per unit
varies inversely with the production
that is the greater the number of units produce
produce
unit okay autonomous fixed factory
overhead cost our behavior here
is fix sha remaining constantia
within the relevant range of
the varning levels of production
so there is a fixed factory overhead cost
cost
is fixed shot
the level of production provided now you
and an effect [Music]
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production units
muslim media and fixed costs
per unit so example non-fixed factory
overhead popular example and i
depreciation of factory building let's
say i'm depreciation of factory building i
i
one hundred thousand per month
depreciation of factory building per
month now 100 thousand
minister for this permanent i ten
thousand units
therefore fixed cost per uni
i ten pesos per
unit the greater the number of units produced
produced
the lower the fixed cost per unit so
let's say
still 100 percent 100 000 depreciation
factory buildings next manchester
um fix factory overhead canson fixture
within the elephant range
perro producer uni
let's say 20
000 units
cost per unit next month one hundred
thousand divided by twenty thousand units
units
that is five the greater the number of
units produced volume ten thousand
negative 20 000
the lower the fixed cost per unit 10 5
mix factory overhead cost these factory
overhead costs are neither fully fixed
nor fully variable in nature
but have characteristics of both
mixed factory overhead costs must be
ultimately separated into
fixed and variable components for the purposes
purposes
of planning and controlling okay
and mixed factory overhead customer is
metal channel [Music]
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okay factors to be considered in the computation
computation
of overhead rate
okay it don't overheat the overhead rate encountering
