Factory Overhead Absorption Methods/Methods for FOH Application
(1). Direct Material Cost Basis
Direct Material Cost Basis = (Estimated FOH for the period / Estimated D.M. Cost) x 100
(2). D.L. Cost Basis
D.L. Hours Basis = (Estimated FOH for the period / Estimated D.L. Cost) x 100
(3). D.L. Hours Basis
(Estimated FOH for the period / Estimated D.L. Hours) = Per D.L. hour
(4). Machine Hours Basis
(Estimated FOH for the period / Estimated machine hours) = Per machine hours
(5). Prime Cost Basis
= (Estimated FOH for the period / Estimated Prime Cost) x 100
(6). Conversion Cost Basis
= (Estimated FOH for the period / Estimated Conversion Cost) x 100
(7). Units of Production Basis
= (Estimated FOH for the period / Estimated No. of Units) x 100
Factory Overhead Variance Formulas
(1). FOH Applied Rate/Burden Rate
= Estimated FOH for Normal Volume / Normal Volume
(2). Applied FOH for capacity attained/Actual capacity
= Capacity attained x FOH Applied rate
(3). Variable Cost Rate/V.C.R.
= Estimated variable cost for normal volume / Normal volume
(4). Variable Cost for Capacity Attained
= Capacity attained x Variable cost rate
(5). Spending variance/Budget/Expense variance
= Actual FOH – Budgeted Allowance
(6). Capacity Variance/Volume Variance/Idle Capacity Variance
= Applied FOH for capacity attained – Budgeted allowance
(7). Budgeted Allowance
= Fixed cost + Variable Cost for capacity attained
(8). Capacity Attained/Actual Capacity/Actual Output
= Applied FOH for Capacity Attained / FOH Applied Rate
(9). Normal Volume/Standard Activity Level
= Fixed Cost / Fixed Cost Rate
(10). Over Applied/Under Applied FOH
= Actual FOH – Applied FOH for actual output
(11). Variable Cost Rate (For Low & High Point Method)
= Difference in Budgeted FOH / Difference in activity level