9.6. Planning and Control of Factory Overhead
Planning and control of overhead items have two major goals:
To minimize overhead costs wherever they occur
To make certain that overhead is allocated, in the most accurate manner, to the various jobs and products being manufactured
For flexible budgeting purposes, it is important to distinguish between variable and fixed overhead expenses. Some are mixed costs that need to be divided, using such methods as the high-low method and regression analysis.
For example, these cost-volume (flexible budget) formulas can be developed for various overhead items:
Factory Overhead Costs | Formula |
---|---|
Electricity | $50 + $10 DLH |
Maintenance | $100 + $15 DLH |
Supervisors' salaries | $5,000 per month |
Indirect materials | $8 per DLH |
Factory depreciation | $7,000 per month |
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