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Supplementary overhead rate

Old Course 3921 views 4 replies

Can someone please explain the meaning of Supplementary Overhead rate and how do we apply it in solving problems of cost sheet in costing ?

 

Regards,

Sumanta.

Replies (4)

i knw overhead rate but i don knw wats supllementary...

Costing has 2 approaches either Absorption costing or marginal costing..

Absorption costing is used to find the cost of a product ,latter is for decision making.

over head rate =total over head/total machine hrs

Overhead rate p.u.-simply multiply by hrs reqd pr unit.

I THINK SUPPLIMENTARY RATE IS USED WHEN ACTUAL AMOUNT OF UNDER/ OVER ABSORPTION IS GIVEN IN D PROBLEM. SRY IF I AM WRONG

Thank you for your replies. According to costing books, if the difference between over/underabsorption is significant, supplementary rate is used. But the question is, how do we calculate this rate and apply to the problems of costing ? 

When the amount of under absorbed and over absorbed overhead is significant or large,
because of differences due to wrong estimation, then the cost of product needs to be adjusted
by using supplementary rates (under and over absorption/actual overhead) to avoid
misleading impression.


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