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Accounting for Factory Overhead - Computation of Predetermined Overhead Rate | Filipino Accounting Tutorial | YouTubeToText
YouTube Transcript: Accounting for Factory Overhead - Computation of Predetermined Overhead Rate
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Video Summary
Summary
Core Theme
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]
[Music]
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]
[Music]
okay factors to be considered in the computation
computation
of overhead rate
okay it don't overheat the overhead rate encountering
is applied at eighty percent of direct
labor costs
twenty percent of direct materials so
you overhead
overhead rate you know not encountering your
your
support accounting cycle and it can be
in the form of one hundred percent of
directly workers
factory up factory overhead applied is
eighty percent of direct labor cost so
you know
output direct materials cost
um direct labor cost direct labor
number three inclusion
or excluding of fixed
factory overhead so merenting absorption costing
costing
method used for cost accounting and
letter b
direct costing which is your method used
for internal
reporting you management services
absorption costing cassette and
treatments a fixed factory overhead
it's a direct costing demand and treatment
treatment
now fix factory overhead i
period cause meanings a direct costing
a fixed factory overhead itinerary has not
ray or several rakes
that are a plant wide or blanket rate
one grade for all producing departments
letter be departmentalized reward for
each producing
department so mamayana elaborate on
producing and servicing departments
base to use base to use the base to be
used should be related to functions
represented by the overhead cost being
the most appropriate base to use is
direct labor
example labor oriented
nation is direct labor arts or cost so
if it's a big commercial
if factory overhead is investment
oriented related to the operation of machinery
machinery
then the most appropriate base will be
factory overhead or konkaramiha factory
overhead mode
investment related ratings investment oriented
if factory overhead is material oriented
then materials cost might be considered
as the most
the simplest of all bases is the physical
physical output
output [Music]
okay illustration required compute the
pre-determined factory overhead rate
based on number one material cost
number two units of production number three
three
machine arts number four dielectric
labor cost
number five direct
labor arse okay
the round company estimates factory
overhead rate at 450
000 pesos for the next fiscal year
it is estimated that 90 000 units will be
be
okay conversion will require
an estimated hundred thousand direct
labor hours
at a cost of three pesos per
hour with forty five thousand machine hours
hours
okay compute the predetermined factory
overhead based on material costs
600 thousand
material costs 600
100 000 direct labor ares
times that long piece over you need that
and number of direct labor
rc 900 thousand
compute the predetermined factory
overhead rate based on
number one material cost so factory
factory overhead rate
four hundred thousand divided by
six four hundred fifty thousand divided
by six hundred
thousand that is
75 and factory overhead rate
materials [Music]
materials number two
factory overhead rate is equal to
450 000
divided by number of units
produced 90 000
units 450 000
divided by 90 000
units is equal to
factory overhead rate basin number two
is equal to
units produced
machine hours factory overhead rate is
equal to
450 000 divided by
number of ours 45 000
rs that is
basin number three factory overhead rate
is equal to 10 pesos
divided by number of directly
sorry direct labor costs 300
000 pesos 450 000
divided by 300
thousand pesos direct labor cost equals to
150
percent factory overhead rate
is equal to 150
of direct
and number five
450 000
divided by number of direct laboratories
which is 100
450 000 divided by 100
is equal to four pesos
factory overhead rate is equal to
four pesos and 50 centavos
per direct labor [Music]
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