Cost Accounting: Overhead

Hello dear students,

This lesson is an extension to my previous lesson titled overhead.

Once the overhead rate is determined, the overhead rate is to be used to find out the recovered overhead, for calculating recovered OVERHEAD, we use:

Overhead rate × actual base (output or hours).

The resultant amount is known as recovered OVERHEAD.

The resultant. Overhead is then compared with actual overhead incurred 

Now the difference is obtained.

If the difference is positive the situation is known as overabsorbed

If the difference is negative the situation is known as underabsorbed 

If the OVERHEAD is underabsorbed, it is to be disposed 

We dispose as follows:-

1:  use of supplementary rate

2: transfer to profit and loss account

3: carry over to next period

I hope that you will find the above mentioned article may be useful and relevant.