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gjtseng
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Joined: 26 Jan 2012
Online Status: Offline
Posts: 51

Posted: 20 May 2012 at 04:27 \| IP Logged

Hey guys

I am using becker 2011 edition,

On page B1-59, it said that the overhead applied = pre-determined rate X "ACTUAL" cost driver

On page B5-69 Variances Analysis, it said that the overhead applied = standard rate X "STANDARD" allowed

According to my undersanding, the overhead here should be the same. Why one use ACTUAL and one use STANDARD allowed?

Thx

maryk
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Joined: 21 Nov 2011
Online Status: Offline
Posts: 56

Posted: 20 May 2012 at 12:52 \| IP Logged

I don't use Becker but,

Variable OH is allocated using estimated ACTUAL activity level x pre-determined rate.

Fixed OH is allocated using NORMAL capacity x standard rate (SFAS 151)

JE's for allocating: Dr VOH/FOH control account
                            Cr expense accounts

JE's for applying actual activity:

                            Dr WIP
                            Cr VOH/FOH control account

Disposition of over/under applied (over = cr balance in control acct. under = dr balance in control account):

                           If immaterial - straight to COGS (expediency)
                           Variable material - Prorate to WIP, FG & COGS
                           Fixed material - ALWAYS goes to COGS

This is how I understand the topic. Hopefully there is something useful to you in here.

__________________
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gjtseng
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Joined: 26 Jan 2012
Online Status: Offline
Posts: 51

Posted: 20 May 2012 at 22:52 \| IP Logged

Hey MaryK

Thx for ur explaination! i am still a little confuse on this. Gauss i should read a bit more book to understand this. Thank you anyway.

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