Preparing the Overhead Costs Budget

Manufacturing Overhead Costs Budget:  A basis for determining overhead costs will be last year’s numbers. After gathering last year’s numbers, you can  compute  any expected increase  and reductions based on efficient processes that might have being implemented. Overhead costs could be both fixed and variable.  Fixed and variable overhead are added to compute the overhead  costs per cost driver unit. For instance if company x has $15,000 of fixed overhead costs and $5,000 of variable overhead costs, total overhead costs will be $20,000. If 200 units were to be produced then budgeted overhead cost per unit will be $100. According to general accepted principles both fixed and variable overhead costs are inventoriable costs.

 

Next: Preparing the  Ending Inventories Budget

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