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What is allocated manufacturing overhead?

Manufacturing overhead includes indirect manufacturing costs such as repairs and scrap depreciation. To allocate these costs to your inventory items, divide the manufacturing overhead by an allocation base, such as machine hours used or labor hours worked.

What is the formula for applying overhead to a specific job?

The formula for applying overhead to a specific job is: Predetermined overhead rate x amount of allocation base incurred by job.

How are overhead costs assigned to jobs in production?

To allocate overhead costs, an overhead rate is applied to the direct costs tied to production by spreading or allocating the overhead costs based on specific measures. For example, overhead costs may be applied at a set rate based on the number of machine hours or labor hours required for the product.