5. Production unit rate= factory overhead
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No of units Produced
Eg .
Overhead=1000
No of units produced=200
Cost unit rate = 1000/200 = Rs 5 p. u
6. Percentage of Direct Material Cost
Percentage of Direct Labour Cost
Percentage of Prime Cost
7. the actual and predetermined overhead rate of
production overhead is computed by dividing the
production overhead by the direct material cost and
multiplying by 100
Suitability-
1. When only one kind of article is produced
2. When prices of material are stable.
3. When same quantity of material is used for all units.
4. When material cost forms a greater part of the cost of
production
8. the actual and predetermined overhead rate of
production overhead is computed by dividing the
production overhead by the direct wages cost and
multiplying by 100
Suitability-
1. When production is uniform.
2. When labour cost is predominant part in the cost of
production.
3. When there is no variation in the wage rate.
4. When the ratio of skilled and unskilled labour is
constant.
9. This method is a combination of direct material
method and direct wages method. The actual
and predetermined overhead rate of
production overhead is computed by dividing
the production overhead by the prime cost and
multiplying by 100
11. . In this method overhead absorption rate is
computed by dividing the production overheads
by the direct labour hours.
Suitability
1. It is suitable when most of the work is done
manually
2. It is suitable when the production is not uniform.
3. It is suitable when the percentage method fails to
give accurate result.
12. The cost of running a machine per hour can be
called the machine hour rate. The actual or
predetermined overhead rate is computed by
dividing production overhead cost by the
machine hours
Duel hour Rate – A combination of labour
hour rate and machine hour rate is known as
duel hour rate.