Concept explainers
Concept introduction:
Predetermined overhead allocation:
Manufacturing overhead cost is the pool of all indirect costs incurred for the production. These are the costs which are not directly traceable to the product.
The overhead applied on the basis of predetermined overhead allocation may result in over or under application of the overhead. If the overhead applied is more than the actual overhead cost, then it shall be called over applied overhead. If the overhead applied is less than the actual overhead cost, then it shall be called under applied overhead.
To calculate:
Total Under or over applied fixed manufacturing overhead.
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