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In: Accounting

how to calculate the overhead cost applied to a job in accounting

how to calculate the overhead cost applied to a job in accounting

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Expert Solution

Overhead cost applied to a job in accounting is calculated by multiplying the predetermined overhead rate by the number of machine-hours or direct labor-hours actually used during the given period.

If machine hours has been used as base to calculate the predetermined overhead rate, then multiply the predetermined overhead rate by the actual number of machine hours used. However, if direct labor hours has been used as base to calculate the predetermined overhead rate, then multiply the predetermined overhead rate by the actual number of direct labor hours used.

In some cases, direct labor cost is used to calculate the predetermined, in such case multiply the predetermined overhead rate by the actual direct labor cost incurred during the given period. For example, if the predetermined overhead rate is 75% of direct labor cost and actual direct labor cost incurred is $100,000, then overhead applied to job would be $75,000 ($100,000 x 75%).  

ekkarill92 answered 1 year ago
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