Departmental Overhead Rates: 동영상 및 연습문제
Departmental Overhead Rates assign manufacturing overhead using a separate rate for each production department rather than one plant-wide rate for the entire factory. This approach improves costing precision because each department may consume overhead differently. A department’s rate is found by dividing its budgeted overhead cost by its budgeted allocation base, such as direct labor hours or machine hours: \( \text{Departmental overhead rate}=\frac{\text{Budgeted overhead cost}}{\text{Budgeted activity base}} \).
Each department applies overhead only with its own assigned cost driver. A department using a direct labor hour rate applies overhead based on direct labor hours, while a department using a machine hour rate applies overhead based on machine hours. After overhead is applied by department, the amounts are combined for the product and added to direct materials and direct labor to determine unit product cost. Compared with a plant-wide overhead rate, departmental rates usually provide more accurate product costs when products spend different amounts of time or resources in different departments.
The Departmental Overhead Rate Method
The Departmental Overhead Rate Method
Sam’s Thymes Co. produces various types of products and applies manufacturing overhead to job orders using departmental rates for each department, instead of one single rate for the whole factory. The rates set for its two production areas are:
Processing Department: \(25 per direct labor hour (DHL)
Packaging Department: \)15 per machine hour (MH)
Job 242 used the following direct labor hours and machine hours in the two manufacturing departments:
520
445
390
195
학생들이 이 주제에 대해 묻는 질문은 다음과 같습니다:
The departmental overhead rate method assigns manufacturing overhead costs using separate rates for each production department instead of one plant-wide rate. This method improves accuracy because different departments consume overhead differently. To calculate a department's overhead rate, divide its budgeted overhead cost by its budgeted activity base, such as direct labor hours or machine hours. The formula is: . Each department applies overhead based on its own cost driver, and the overhead costs from all departments are combined with direct materials and direct labor to find the total unit product cost. This method is more precise than a plant-wide rate, especially when products use departments differently.
To calculate the overhead rate for each department, divide the department's budgeted overhead cost by its budgeted allocation base, such as direct labor hours or machine hours. The formula is: . For example, if the sewing department has \$540,000 in overhead and 90,000 direct labor hours, the overhead rate is \$6 per direct labor hour. This rate is then multiplied by the actual direct labor hours used by each product in that department to allocate overhead costs accurately.
The departmental overhead rate method is more accurate because it recognizes that different departments consume overhead resources differently. Instead of using one single overhead rate for the entire plant, it uses separate rates for each department based on their specific overhead costs and activity levels. This means overhead is allocated more precisely according to how much time or resources each product uses in each department. For example, if pajamas spend more time in sewing and slippers more in packaging, the departmental method reflects these differences, leading to more accurate product costing compared to the plant-wide method.
To apply departmental overhead rates, first calculate each department's overhead rate by dividing its budgeted overhead by its budgeted activity base. Then, multiply the overhead rate by the actual activity (like direct labor hours) each product uses in that department. For example, if the sewing department's rate is \$6 per direct labor hour and pajamas use 0.8 hours, the overhead allocated is \$4.80. Repeat this for all departments involved. Finally, add the overhead costs from all departments to the product's direct materials and direct labor costs to find the total unit product cost.
The main advantage of departmental overhead rates is improved accuracy in product costing because overhead is allocated based on each department's specific costs and activities. This is especially useful when products consume resources differently across departments. However, the disadvantage is increased complexity and time required to calculate multiple overhead rates and track product activity in each department. While more precise than a plant-wide rate, it may still not be as accurate as activity-based costing, which considers multiple cost drivers.
