Hi all,
We are in the process of calculating the manufacturing overhead rate and the manufacturing rates for standard pricing and inventory costing. To meet the WP`s requirements, the overhead and rates for inventory costing are calculated using actual costs and actual activity quantities. We have PP in use with the confirmation of processing hours. Thus, credits land on the production main cost centers. Various internal activity allocations are also posted, such as the confirmation of maintenance orders. Here, the cost center of the plant electricians is credited and various receiving cost centers are debited via the settlement of maintenance orders. In addition, we have so-called auxiliary cost centers, such as the tool shop, which also regularly confirm processing hours to production orders in order to credit themselves. According to the costing sheet in CO-PC, the production overhead is allocated as a percentage of the valuated processing hours (i.e. direct production costs).
How do you now calculate the production overhead rate? One suggestion was: Divide the balance of the debit/credit of the production support cost centers by the total production costs (i.e., the balance of the debit/credit of the costs of the production main and production support cost centers together).
Another suggestion was: allocate balance of debit/credit of production support cost centers+ shortfall of production main costs by the valuated actual processing hours. Which suggestion is the correct one? Thanks for your comments.
Greetings mgr