Cost Accounting

8

Overhead Rates

CHAPTER OUTLINE

1. Introduction

2. Absorption of Overheads

3. Machine Hour Rate

4. Miscellaneous Illustrations

5. Advanced-Type Solved Problems

Chapter Summary

Exercise for Your Practice

Discussion Question

Problems

Examination Problems

LEARNING OBJECTIVES

After reading this chapter, you will be able to understand:

• Overhead rates

• Absorption of overheads

• Machine hour rate

8.1 INTRODUCTION

For a proper understanding of the topic, overheads are split into overhead analysis and overhead rates. In overhead rates, the calculations done are cost per unit, cost per hour, cost per machine or cost per machine hour rate (MHR). These rates are calculated to find out the method of recovery of overheads.

Overhead rates are fixed ...