On budgeted fixed overhead rate - formula

On budgeted fixed overhead rate - formula

Budgeted fixed overhead cost per unit of cost-allocation base

=

Budgeted total costs in fixed overhead  cost pool

/

Budgeted total quantity of cost-allocation base

E.g.

Budgeted fixed overhead cost per unit of cost-allocation base ($57.50 per machine-hour)

=

Budgeted total costs in fixed overhead  cost pool ($3,312,000)

/

Budgeted total quantity of cost-allocation base

(57,600 machine hours)

Budgeted fixed overhead cost per output unit

=

Budgeted quantity of cost-allocation base allowed per output unit

x

Budgeted fixed overhead cost per unit of cost-allocation base

E.g.

Budgeted fixed overhead cost per output unit ($28.75 per jacket) (refer to [actual output x budgeted fixed  overhead cost per output unit]-Flexible budget[same as static budget] difference as production-volume variance)

=

Budgeted quantity of cost-allocation base allowed per output unit (0.5 of a machine-hour per jacket)

x

Budgeted fixed overhead cost per unit of cost-allocation base ($57.5 per machine-hour)