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Definition of Overhead allocation
The process of spreading production overhead equitably over the volume of production of goods or services.
the systematic assignment of an amount to a recipient
The process of storing costs in one account and shifting them to other
hours, machine hours or volume of production
the amount of overhead that has been assigned to Work in Process Inventory as a result of productive activity; credits for this amount are to an overhead account
a method of allocating joint cost to joint products using a
The decision regarding how an institution's funds should be distributed among the
decision allocation of invested funds between risk-free assets versus the risky portfolio.
the assignment, using some reasonable basis,
An asset allocation strategy in which the asset mix is mechanistically shifted in
All the costs incurred during the manufacturing process, minus the
That portion of total overhead costs which remains constant in size
the difference between the total actual fixed overhead and budgeted fixed overhead;
see volume variance
a method of allocating joint cost to joint products that uses, as the proration base, sales value at split-off minus all costs necessary
A general term referring to period costs, such as selling, administration and financial expenses.
a credit balance in the overhead account
Any cost other than a direct cost – may refer to an indirect production cost and/or to a non-production expense.
any factory or production cost that is indirect to
overhead application rate
see predetermined overhead rate
overhead generally refers to indirect, in contrast to direct,
overhead efficiency variance
the difference between total budgeted overhead at actual hours and total budgeted
The rate (often expressed per hour) applied to the time taken to produce a product/service, used to allocate production overheads to particular products/services based on the time taken. May be calculated on a business-wide or cost centre basis.
overhead spending variance
the difference between total actual overhead and total budgeted overhead at actual
physical measurement allocation
a method of allocating a joint cost to products that uses a common physical characteristic as the proration base
Policy asset allocation
A long-term asset allocation method, in which the investor seeks to assess an
predetermined overhead rate
an estimated constant charge per unit of activity used to assign overhead cost to production or services of the period; it is calculated by dividing total budgeted annual overhead at a selected level of volume or activity by that selected measure of volume or activity; it is also the standard overhead application rate
A general term referring to indirect costs.
sales value at split-off allocation
a method of assigning joint cost to joint products that uses the relative sales values of the products at the split-off point as the proration basis; use of this method requires that all joint products
standard overhead application rate
a predetermined overhead rate used in a standard cost system; it can be a separate variable or fixed rate or a combined overhead rate
Tactical Asset Allocation (TAA)
An asset allocation strategy that allows active departures from the normal
total overhead variance
the difference between total actual overhead and total applied overhead; it is the amount of underapplied or overapplied overhead
a debit balance in the overhead account at the end of a period; when the applied overhead amount is less than the actual overhead that was incurred
variable overhead efficiency variance
the difference between budgeted variable overhead based on actual input activity and variable overhead applied to production
variable overhead spending variance
the difference between total actual variable overhead and the budgeted amount of variable overhead based on actual input activity
A cost that is not directly associated with a single activity or event. Such
The allocation of either under- or over-allocated overhead costs among the
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