0Hello, student the following article is being given to understand the concept of overhead and its use in cost account. Overhead is the sum total of all indirect expenses i.e., indirect material, indirect wages and indirect expenses.
Methods to determine overhead rate.
1- As a % of direct material cost: Amount of overhead ×100/amount of direct material.
2- As of direct wages: Amount of overhead × 100 / amount of direct wages.
3- Based on direct labour hours: Overhead rate per direct labour hour. Amount of overhead / total of direct labour hours.
4- Based on machine hour rate: Overhead rate per machine hour. Amount of overhead / total of machine hours
5- Based on production quantity overhead rate per unit amount of overhead / total of output
