Allocate overhead transparently
See this course’s project requirements
A two-product costing and constrained-capacity model with contribution, overhead, bottleneck minutes and a demand-limited production recommendation.
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What to include
- A cost-classification and unit-cost schedule.
- A contribution schedule and two-product profit bridge.
- An overhead-rate and applied-versus-actual reconciliation.
- A capacity feasibility and contribution-per-minute table.
- A checked feasible product mix with an explicit tie and resource ledger.
- A price/capacity sensitivity and conditional product-mix recommendation.
Review and revise
Use these criteria to check your work and choose what to improve.
- Costs: behavior, units and overhead assignment are explicit.
- Feasibility: time/demand/whole-unit constraints hold.
- Objective: contribution and fixed-pool profit reconcile.
- Decision: ties and changed-price/capacity scenarios are checked.
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The idea in everyday life
Original fictional practice. All money is USD. No account, payment, personal record or outside participation is required. Fictional workshop sells whole units only. Product A: price 30, variable material 12, variable labor 6, bottleneck 6 min, demand cap 50. Product B: price 24, material 8, labor 4, bottleneck 4 min, demand cap 80. Available bottleneck time 600 min. Monthly fixed manufacturing overhead 600, budget activity 600 min (rate 1/min). All produced units sell within demand limits; no inventory, other constraints or taxes in this bounded model.
Allocation is an assignment rule, not an additional cash cost.
Allocate overhead transparently — complete worked case
Allocation is an assignment rule, not an additional cash cost.
Fictional workshop sells whole units only. Product A: price 30, variable material 12, variable labor 6, bottleneck 6 min, demand cap 50. Product B: price 24, material 8, labor 4, bottleneck 4 min, demand cap 80. Available bottleneck time 600 min. Monthly fixed manufacturing overhead 600, budget activity 600 min (rate 1/min). All produced units sell within demand limits; no inventory, other constraints or taxes in this bounded model.
Two products
Paste at A1.
| AProduct | BPrice | CMaterial | DVariable labor | EMachine min | FMax demand |
|---|---|---|---|---|---|
| A | 30 | 12 | 6 | 6 | 50 |
| B | 24 | 8 | 4 | 4 | 80 |
Copy as plain text
1. 3.1 Allocate
Divide estimated overhead by the stated activity base and label the rate.
You should see: 1 dollar per machine minute.
2. 3.2 Allocate
Apply minutes×rate to each unit and add to variable costs for an allocated reporting cost.
You should see: A24 and B16 unit full costs.
3. 3.3 Allocate
Apply the rate to 46 A/80 B activity; compare with a separately supplied actual 650.
You should see: Applied 596; underapplied 54.
4. 3.4 Allocate
Change budget activity to 500 min while pool stays 600; recalculate rate 1.20 and A/B allocations 7.20/4.80.
You should see: Changed allocation does not itself change total actual spending.
What to finish
An overhead-rate and applied-versus-actual reconciliation.
Watch for this
Using a chosen allocation base as proof of an avoidable cost.
How can I tell I understand it?
Verify that your completed overhead-rate and applied-versus-actual reconciliation meets the three lesson-specific checks and retains the supporting original records.
Quick knowledge check
Answer all 3 questions. Get at least 2 right and the lesson completes automatically.
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Answer all 3 questions above and get at least 2 right. You can review the explanations and try again.
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Source & access notes · checked 2026-10-01
Read estimated pool/activity rate and application versus actual overhead; no source activities copied.
Access: Public primary page body opened and relevant sections read through the web reader on 2026-10-01; no account required for reading.
Reuse: Original Life Starter cases, datasets and questions; no source exercise or worked dataset reproduced. Links support further reading.
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