Answer
The steps to develop a budgeted variable overhead cost-allocation rate are as follows:
1. Choose the budget period (usually annual).
2. Select the cost-allocation base (e.g., machine-hours) for allocating variable overhead costs.
3. Identify the total budgeted variable overhead costs.
4. Compute the rate per unit of the cost-allocation base, which is generally expressed as a standard rate per output unit (e.g., per jacket). This rate is determined by dividing the budgeted variable overhead costs by the budgeted input allowed per output unit.
Work Step by Step
The steps to develop a budgeted variable overhead cost-allocation rate are as follows:
1. Choose the budget period (usually annual).
2. Select the cost-allocation base (e.g., machine-hours) for allocating variable overhead costs.
3. Identify the total budgeted variable overhead costs.
4. Compute the rate per unit of the cost-allocation base, which is generally expressed as a standard rate per output unit (e.g., per jacket). This rate is determined by dividing the budgeted variable overhead costs by the budgeted input allowed per output unit.
