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Imagine you are trapped in a cage.Every time you press a button,you get a drink of water.Every time you pull on a string,you get shocked.Soon,you understand that you should press the button,but leave the string alone.This example follows the theory of:
Fixed Manufacturing Overhead
Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance of a manufacturing facility.
Predetermined Overhead Rate
A rate used to allocate overhead costs to products or job orders, based on estimated costs and activity levels.
Manufacturing Overhead
All manufacturing costs that are not directly attributable to a specific product, including indirect labor, maintenance, and utilities.
Machine-Hours
A measure of the total time machines are in operation during a given period, often used in cost accounting to allocate expenses based on machine usage.
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