{"id":876,"date":"2015-12-27T15:19:34","date_gmt":"2015-12-27T15:19:34","guid":{"rendered":"https:\/\/courses.candelalearning.com\/managacct2x1xmaster\/?post_type=chapter&p=876"},"modified":"2015-12-27T15:19:34","modified_gmt":"2015-12-27T15:19:34","slug":"chapter-4-key-points","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-managacct\/chapter\/chapter-4-key-points\/","title":{"raw":"Chapter 4 Key Points","rendered":"Chapter 4 Key Points"},"content":{"raw":"

Activity-Based Costing Takeaways<\/strong><\/h2>\r\nIn this chapter we reviewed\/learned 3 ways of allocating overhead. We will use the formula for Predetermined Overhead Rate (POHR) you have already learned.\r\n\r\nPlantwide Overhead<\/strong>\r\n\r\nPlantwide Overhead allocation means the company uses just one allocation rate (POHR) for the entire company. The rate is calculated as:\r\n\r\nTotal Overhead for company<\/span>\r\n\r\nTotal Base for company\r\n\r\nThe base is typically direct labor but it doesn\u2019t have to be \u2013 it can be anything the company decides. To apply overhead, you will take the ACTUAL amount of whatever base was selected for a department, product, job, etc. and multiply by the Plantwide POHR.\r\n\r\n \r\n\r\nDepartmental Overhead<\/strong>\r\n\r\nDepartmental Overhead allocation means the each department selects a different BASE to be used to allocate overhead. The rate is calculated as:\r\n\r\nTotal Departmental Overhead<\/span>\r\n\r\nTotal Departmental Base chosen by Department\r\n\r\nThe base can be anything the department decides but it will use the DEPARTMENT costs only and not total costs. You can have different rates for every department you choose.\r\n\r\nTo apply overhead, you will take the ACTUAL amount of whatever base was selected for a department and multiply by the Department POHR for that department.\r\n\r\n \r\n\r\nActivity Based Overhead<\/strong>\r\n\r\nIn Activity-Based Overhead allocation, the company\u2019s overhead is divided into cost activities. These costs have a cost driver which is the object that causes the cost to increase or decrease. A cost pool is where costs that have the same cost drivers are added together to make on activity. Each activity will have its own overhead allocation rate (POHR). \u00a0The rate is calculated as:\r\n\r\nTOTAL Overhead for the cost pool or activity<\/span>\r\n\r\nTOTAL cost driver quantity (or base)\r\n\r\nThe base or cost driver can be anything but the rate is based on TOTAL amounts for that activity. You will have different rates for every activity or cost pool.\r\n\r\nTo apply overhead, you will take the ACTUAL amount of whatever base or cost driver for the job, product or department you are assigning overhead<\/em> to (not TOTAL here just the specific amount for the overhead you are applying) and multiply by the Activity\u2013based POHR for that activity.\r\n\r\n \r\n\r\nClick ABC Takeways<\/a> for a printable copy.","rendered":"

Activity-Based Costing Takeaways<\/strong><\/h2>\n

In this chapter we reviewed\/learned 3 ways of allocating overhead. We will use the formula for Predetermined Overhead Rate (POHR) you have already learned.<\/p>\n

Plantwide Overhead<\/strong><\/p>\n

Plantwide Overhead allocation means the company uses just one allocation rate (POHR) for the entire company. The rate is calculated as:<\/p>\n

Total Overhead for company<\/span><\/p>\n

Total Base for company<\/p>\n

The base is typically direct labor but it doesn\u2019t have to be \u2013 it can be anything the company decides. To apply overhead, you will take the ACTUAL amount of whatever base was selected for a department, product, job, etc. and multiply by the Plantwide POHR.<\/p>\n

 <\/p>\n

Departmental Overhead<\/strong><\/p>\n

Departmental Overhead allocation means the each department selects a different BASE to be used to allocate overhead. The rate is calculated as:<\/p>\n

Total Departmental Overhead<\/span><\/p>\n

Total Departmental Base chosen by Department<\/p>\n

The base can be anything the department decides but it will use the DEPARTMENT costs only and not total costs. You can have different rates for every department you choose.<\/p>\n

To apply overhead, you will take the ACTUAL amount of whatever base was selected for a department and multiply by the Department POHR for that department.<\/p>\n

 <\/p>\n

Activity Based Overhead<\/strong><\/p>\n

In Activity-Based Overhead allocation, the company\u2019s overhead is divided into cost activities. These costs have a cost driver which is the object that causes the cost to increase or decrease. A cost pool is where costs that have the same cost drivers are added together to make on activity. Each activity will have its own overhead allocation rate (POHR). \u00a0The rate is calculated as:<\/p>\n

TOTAL Overhead for the cost pool or activity<\/span><\/p>\n

TOTAL cost driver quantity (or base)<\/p>\n

The base or cost driver can be anything but the rate is based on TOTAL amounts for that activity. You will have different rates for every activity or cost pool.<\/p>\n

To apply overhead, you will take the ACTUAL amount of whatever base or cost driver for the job, product or department you are assigning overhead<\/em> to (not TOTAL here just the specific amount for the overhead you are applying) and multiply by the Activity\u2013based POHR for that activity.<\/p>\n

 <\/p>\n

Click ABC Takeways<\/a> for a printable copy.<\/p>\n","protected":false},"author":1195,"menu_order":5,"template":"","meta":{"_candela_citation":"[]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-876","chapter","type-chapter","status-publish","hentry"],"part":323,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/suny-managacct\/wp-json\/pressbooks\/v2\/chapters\/876","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/suny-managacct\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/suny-managacct\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-managacct\/wp-json\/wp\/v2\/users\/1195"}],"version-history":[{"count":1,"href":"https:\/\/courses.lumenlearning.com\/suny-managacct\/wp-json\/pressbooks\/v2\/chapters\/876\/revisions"}],"predecessor-version":[{"id":878,"href":"https:\/\/courses.lumenlearning.com\/suny-managacct\/wp-json\/pressbooks\/v2\/chapters\/876\/revisions\/878"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/suny-managacct\/wp-json\/pressbooks\/v2\/parts\/323"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/suny-managacct\/wp-json\/pressbooks\/v2\/chapters\/876\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/suny-managacct\/wp-json\/wp\/v2\/media?parent=876"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-managacct\/wp-json\/pressbooks\/v2\/chapter-type?post=876"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-managacct\/wp-json\/wp\/v2\/contributor?post=876"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-managacct\/wp-json\/wp\/v2\/license?post=876"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}