Fixed and Variable Overhead for Material Issues Formulas Home | FAQs & Troubleshooting

 

 Show/Hide All

Standard overhead material costs are calculated using only the percentages for overhead in step 0000. Actual overhead costs are calculated using the percentages associated with the step level at which the material is issued. This means that unless all materials are issued at step 0000, it is not likely that a zero variance will be produced for overhead costs associated with material.

Except for differences noted for material overhead costs, actual costs are computed in the same way as standard costs. If all materials are issued using step 0000, variances will accurately reflect differences from planned costs. One way to separate overhead rates for material from those of labor is to use step 0000 exclusively for material costs and other steps for labor operations. With 50 percent of the material issued and 50 percent of the labor completed, variances should be approximately 50 percent.

The following formulas can be used to calculate the fixed and variable overhead for material issues.

Fixed Overhead for Material Issues =
Total Planned Cost x Fixed Overhead % of Cost for Step 0000

Variable Overhead for Material Issues =
Total Planned Cost x Variable Overhead % of Cost for Step 0000

 Example

Work	Cntr	Op Code/Step	% of Cost	Planned Cost	Mat'l OH Amt
SHER	FXD	00001/0000	6.0	x 380.00	22.80
	VAR		3.0	x 380.00	11.40

 

Percentages are defined in Operation Code Maintenance.

For more information, see:

Standard Costs Formulas