Tuesday, 6 June 2017

Methods for Allocation Of Factory Overhead Costs

Factory Overhead Costs

In the determination of the rate of factory overhead costs per Department  allocate middle-aged factory overhead to production Department Department aides who enjoy the Services Department aides. In general the rate of factory overhead costs are only calculated for departments of production, because the management of the material the raw products that normally occur in the production.

Because the factory overhead costs will be charged to the product not only consists of costs occurring in the departments of production, then in order of determination of the rate of factory overhead costs per Department, middle-aged factory overhead Department helpers are assigned to the Ministry of production.

Allocation of factory overhead costs to production departments Department aides can be done in one of two ways:

  1. Direct allocation Methods (direct allocation method)
  2. Gradual allocation Methods (step method) which consists of:
  3. The continuous allocation Method
  4. Algebraic Method

Direct allocation Methods

In the method of allocation of factory overhead costs directly, the Department helpers are assigned to each production department enjoyed it. Direct allocation methods used in services produced by Ministry aides only enjoyed by the production department only. There is no auxiliary departments who use other maid departments.

Methods of gradual allocation

This method is used when the service that generated the Ministry helpers not only used by the Ministry of production, but also used by other Department aides. Therefore, before the factory overhead costs are allocated to the Department of in two departments production.

The continuous allocation method

In this method the factory overhead costs auxiliary departments which provide services, allocated at each other continuously, so that the amount of overhead costs that have not been allocated becomes meaningless.

Algebraic Method

The lack of completeness in terms of the division was incurred in using the method of gradual success to distribution so that a closed department in advance did not accept the division of costs from departments that closed later.

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