[Linds213]

Hey guys-

Question regarding the applied overhead formula, I’m using Becker 2011 and it seems there is a conflicting formula between Chapter 1 (which discusses ABC costing, etc.) and Chapter 5 (which discusses variable analysis).

The formula in chapter 1 is: Applied overhead = predetermined overhead rate X Actual cost driver

Chapter 5 formula is: Applied overhead = standard rate X standard cost driver per actual units of production

To me, (assuming direct labor hours is the cost driver) it seems the chapter 1 formula is saying to use the ACTUAL number of hours to decide applied overhead, whereas the chapter 5 formula is saying to use the std number of hours per unit X actual units of production.

I understand both equations, but don’t understand how there can be two different equations for the same applied overhead. Are these two different applied overheads when it comes to ABC costing & variance analysis?

Any help is appreciated, test is on Thurs!

R -Passed
F- Passed
A- Passed
B-

**Lindsey

[jenuno01]

I am no BEC expert, I still wonder how I passed on my first try lol. But, would it be possible you are confusing fixed and variable OH variances?

Class of 2012

[Linds213]

Hm…not sure. Thanks for the reply!

I undestand (or so I think!) the variances, its just the applied overhead that is messing me up. I think maybe the formula is different because in one chapter they are referring to standard costing (variances) and the other chapter is based on ABC costing. Can anyone confirm this?

Thanks!!

R -Passed
F- Passed
A- Passed
B-

**Lindsey

[mla1169]

Yes, each equation corresponds to the appropriate costing method.

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Massachusetts CPA (non reporting) since 3/12.

[Linds213]

Thank you mla!

R -Passed
F- Passed
A- Passed
B-

**Lindsey

[Author]

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