Thank you. This clarifies a lot for me. I was given a similar homework assignment to this. And it was just confusing me. I don't get taught how to do this in my class.... I kind of have to figure everything on my own. The terms that the textbook uses is allocation for the base (such as direct labor hours). And uses the terms under or over allocated instead of applied.
Unfortunately, some of the language is not standardized. I'm sorry you don't have a good instructor. Hopefully, you will continue using my videos and website to help you through this course.
Great video.....I am a current Accounting student and want to ask you a quick question regarding another name for "ACTUAL"......can this term also mean "Cost of Goods Sold"??
really helpful and clear delivery and could you teach me how to write an adjustment journal for the underapplied cogs in your example? that likes - Dr. Cost of goods sold - manufacturing overhead, 57,410 Cr. xxx?
Isn't this supposed to be overhead account on B/S and once applied reallocated to WIP? You are showing that applied overhead is expensed immediately to COGS?
Hey Kristin, I ran into a question on my homework: "How much of any underapplied or overapplied overhead would have been due to the fact that the estimated overhead costs were different from the actual?" How would you approach that ? And thanks for the video!
There are two items that would cause your overhead to be overapplied or underapplied - your estimated overhead or your estimated hours. Start by looking at those two items compared to actual.
Kristin Ingram You are very kind! OK the example you posted helped shed a light on the background, i.e. the three types (budget, applied, and actual).. as simple as that was, it seriously cleared much of the issue. However, being a CMA candidate, I get these questions where they use TWO factors in the denominator... for example in the case of labor hours, I noticed that not only did they use the total budgeted hours, but also multiplied it by the price / hour. So you get this OH rate that has an implicit rate within it. I hope I am making sense!
Kristin Ingram I will paste in the answer key for the example I referred to: "The predetermined overhead application rate is found by dividing the total budgeted overhead by the budgeted direct labor cost. Hence, the predetermined overhead application rate is 1.78 [$961,200 ÷ ($15 × 36,000 hours)]." When I was solving I overlooked the $15 because all the formulae I have encountered never mentioned a rate per se.
Yes, they are using direct labor cost. Try not to think of it as two different drivers. It is one driver. Problems typically use direct labor hours, machine hours or direct labor cost. Just be careful to identify the driver before you start working the math.
You have the most calming voice! Almost forgot how much trouble this was giving me😅.
Thanks!
I'm so glad it helped.
Thank you Kristin your explanation is clear, simple and straight forward. You make learning easy and I do appreciate it. Kudos!
Thank you for your comment! Glad I could help!
Congrats and thanks Kristin. Very clear video with evergreen concepts
You're so welcome! Glad you enjoyed it!
Thank you for the easy explanation! Had a quiz today with overhead allocation and this video saved me.
I'm so glad!
Thank you. This clarifies a lot for me. I was given a similar homework assignment to this. And it was just confusing me. I don't get taught how to do this in my class.... I kind of have to figure everything on my own. The terms that the textbook uses is allocation for the base (such as direct labor hours). And uses the terms under or over allocated instead of applied.
Unfortunately, some of the language is not standardized. I'm sorry you don't have a good instructor. Hopefully, you will continue using my videos and website to help you through this course.
I love how you take your time to explain everything ❤❤thank you so much
I appreciate you saying that. I have had some commentors say I go too slow. Thanks!
Great video.....I am a current Accounting student and want to ask you a quick question regarding another name for "ACTUAL"......can this term also mean "Cost of Goods Sold"??
Thank you so much!!
You're welcome!
it's very helpful. Thank you so much Kristin
You're welcome. So glad I could help.
Explained to my standards thanks
You're welcome. Glad I could help.
... and you are a great teacher
Thank you! I appreciate your comments!
YOU ARE SO BEAUTIFUL AND VERY AFFECTING VOICE ❤
Thank you!
Thank you❤❤
You're welcome 😊
really helpful and clear delivery and could you teach me how to write an adjustment journal for the underapplied cogs in your example? that likes - Dr. Cost of goods sold - manufacturing overhead, 57,410 Cr. xxx?
You would credit the same account you used in the prior journal entries as your debit.
Isn't this supposed to be overhead account on B/S and once applied reallocated to WIP? You are showing that applied overhead is expensed immediately to COGS?
It depends on the complexity of the accounting system. This example was for a simple managerial accounting class.
very helpful. thanks. but shouldn't the account debited and credited at the end be "manufacturing overhead" not cogs?
+Mark S it depends on your chart of accounts. Most texts teach students to debut COGS.
Hey Kristin, I ran into a question on my homework: "How much of any underapplied or overapplied overhead would have been due to the fact that the estimated overhead costs were different from the actual?"
How would you approach that ?
And thanks for the video!
There are two items that would cause your overhead to be overapplied or underapplied - your estimated overhead or your estimated hours. Start by looking at those two items compared to actual.
Thank you so much Madam it helped alot
You're welcome. I'm glad I could help!
I like it. thanks a lot.
You're welcome!
I know this is three years later, but can I ask something?
Of course! I respond to all comments and questions.
Kristin Ingram
You are very kind!
OK the example you posted helped shed a light on the background, i.e. the three types (budget, applied, and actual).. as simple as that was, it seriously cleared much of the issue.
However, being a CMA candidate, I get these questions where they use TWO factors in the denominator... for example in the case of labor hours, I noticed that not only did they use the total budgeted hours, but also multiplied it by the price / hour. So you get this OH rate that has an implicit rate within it.
I hope I am making sense!
Do you mean they are using DLH's multipled by average labor rate?
Kristin Ingram
I will paste in the answer key for the example I referred to:
"The predetermined overhead application rate is found by dividing the total budgeted overhead by the budgeted direct labor cost. Hence, the predetermined overhead application rate is 1.78 [$961,200 ÷ ($15 × 36,000 hours)]."
When I was solving I overlooked the $15 because all the formulae I have encountered never mentioned a rate per se.
Yes, they are using direct labor cost. Try not to think of it as two different drivers. It is one driver. Problems typically use direct labor hours, machine hours or direct labor cost. Just be careful to identify the driver before you start working the math.
thank you so much!!
You're welcome!