Modul ke: 12 Fakultas Ekonomi dan Bisnis Akuntansi Biaya Factory Overhead : Planned, Actual and Applied Suryadharma Sim, SE, M. Ak Program Studi S1 Manajemen
The nature of Factory Overhead Factory Overhead is generally defined as indirect materials, indirect labor and all other factory costs that cannot be conveniently identified with or charged directly to specific jobs, lots, products, or other final cost objects. Other term used for factory overhead are factory burden, production overhead, indirect production costs, manufacturing expense, manufacturing overhead, factory expense, and indirect manufacturing cost. Factory overhead as a type of manufacturing costs
Factory overhead is any manufacturing cost that is not direct materials or direct labor. Factory overhead can have variable or fixed nature, depending on whether overhead changes in direct proportion with production volumes. The following are some examples of factory overhead costs: Illustration 3: Examples of fixed and variable factory overhead costs Variable Factory Overhead Examples Fixed Factory Overhead Examples Electricity Depreciation Heating Property taxes Water Property insurance Indirect Materials Indirect Labor Salaries for non-production employees
Illustration 4: Examples of indirect materials cost (overhead cost) Examples Publishing company Automobile manufacturer Indirect Materials Glue, printing press lubricants Factory light bulbs, drill bits Computer manufacturer Assembly line lubricants, screwdrivers, polishers As you can see form the table, indirect materials are an insignificant portion or not an integral part of the finished goods. Indirect labor is the cost of production employees who are involved in the manufacturing process, but do not work on a specific product. For example, wages of custodians, maintenance people, supplies room supervisors, etc. are considered indirect labor.
Illustration 5: Relationship between direct materials, direct labor, overhead, prime cost, and conversion cost
Use of a Predetermined Overhead Rate Because of the impossibility of tracing overhead to specific jobs or specific products, overhead cost is apportioned among jobs and units. A predetermined overhead rate permits a consistent and logical allocation to each unit of output. Companies typically base their predetermined overhead rates on the estimated, or budgeted, amount of allocation base for the upcoming period. This is the method that is used in this chapter, but it is practice that is recently come under severe criticism.
Base to Be Used in predetermined overhead rates Physical Output Direct Material Cost Direct Labor Cost Direct Labor Hours Machine Hours Transactions or activities Physical Output Physical output or units of production is the simplest base for applying factory overhead.
Direct Material Cost In some companies, a study of past costs reveals a high correlation between direct materials cost and overhead. Estimated Factory Overhead x 100 = Factory Overhead as a percentage Estimated material cost of direct materials cost Direct Labor Cost This method s use is logical when a strong relationship between direct labor cost and factory overhead exists and hourly rates of pay are similar for similar work. Estimated Factory Overhead x 100 = Factory Overhead as a percentage Estimated direct labor cost of direct labor cost
Direct Labor Hours The direct labor hours base is designed to overcome the second disadvantage of using the direct labor cost base. Estimated Factory Overhead = Factory Overhead per machine hour Estimated machine hours
Under-applied and Over-applied Overhead Since the predetermined overhead rate is established before a period begins and is based entirely on estimated data, the overhead cost applied to work in process (WIP) will generally differ from the amount of overhead cost actually incurred during a period. The difference between the overhead cost applied to work in process (WIP) and the actual overhead costs of a period is termed as either underapplied overhead or overapplied overhead. For example if a company calculates its predetermined overhead rate $6 per machine hour. 15,000 machine hours are actually worked and overhead applied to production is therefore $90,000 (15,000 hours $6). If actual factory overhead is $95,000 then underapplied overhead is $5,000 ($95,000 $90,000). If the situation is reverse and the company applies $95,000 and actual overhead is $90,000 the overapplied overhead would be $5,000.
Terima Kasih Suryadharma Sim, SE, M. Ak