A single overhead price utilized throughout a complete manufacturing facility simplifies the allocation of oblique manufacturing prices to services or products. This calculation entails dividing the estimated complete overhead prices for the upcoming interval by the estimated complete quantity of the fee driver. Widespread value drivers embrace direct labor hours, machine hours, or direct labor value. As an example, if estimated complete overhead is $500,000 and estimated direct labor hours are 25,000, the ensuing price is $20 per direct labor hour.
Utilizing a single price streamlines value accounting processes and affords a comparatively easy strategy to making use of overhead. This may be notably helpful for smaller organizations or these with comparatively homogenous merchandise. Traditionally, it offered an economical technique when detailed monitoring of overhead bills was difficult or costly. Nonetheless, its accuracy relies upon closely on the uniformity of manufacturing actions and the correlation between the chosen value driver and precise overhead consumption.
