Overhead Allocation Rate (Accounting) - Explained
What is the Allocation Rate?
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Table of ContentsWhat is Allocation Rate?
What is Allocation Rate?
The allocation rate is the amount of overhead cost per hour of labor that goes into the production of a unit. The calculation is as follows:
Total Overhead x Total Labor Hours = Overhead Allocation Rate
This calculation applies equally if you have multiple products with varying total hours of labor required for production. To determine the specific allocation of overhead, you would multiply the Overhead Allocation Rate by the number of labor hours invested to produce that product.
Back to: ACCOUNTING, TAX, & REPORTING
- Job Costing vs Process Costing
- Assign Overhead Costs to Products
- Plantwide Cost Allocation
- Department Cost Allocation
- Activity-Based Costing
- Weighted-Average Cost of Products
- Production Cost Report
- Fixed, Variable, and Mixed Cost Estimations
- Contribution Margin Income Statement
- Cost-Volume-Profit Analysis
- Margin of Safety
- Contribution Margin per Unit of Constraint
- Absorption Costing vs Variable Costing
- Differential Analysis and Decisions
- Cost Decisions for Joint Products
- Capital Budgeting
- Life Cycle Costing
- The Master Budget
- Activity-Based Budgeting
- Standard Costs
- Imputed Value
- Variance Analysis for Product Costs
- Absorption Pricing
- Price Variance
- Absorption Variance
- Responsibility Centers
- Comparing Segmented Income
- Using ROI to Evaluate Performance
- Using Residual Income to Evaluate Performance
- Use Economic Value Added to Evaluate Performance
- Transfer Pricing