OVERHEAD COST BUDGET

Created by:
Accounting Education IUP 2016
Muflihatun Nisa’ 7101416066
Feri Subekti 7101416216

Lecturer:
Badingatus Solikhah, S.E., M.Si., Akt., CA

ECONOMICS EDUCATION
FACULTY OF ECONOMICS
UNIVERSITAS NEGERI SEMARANG
2018
A. DEFINITION OF OVERHEAD COST BUDGET
The manufacturing overhead budget contains all manufacturing costs other than the costs
of direct materials and direct labor (which are itemized separately in the direct materials
budget and the direct labor budget). The information in the manufacturing overhead
budget becomes part of the cost of goods sold line item in the master budget.
Also, the total of all costs in this overhead budget are converted into a per-unit overhead
allocation, which is used to derive the cost of ending finished goods inventory, and which
in turn is listed on the budgeted balance sheet. The information in this budget is among
the most important of the various departmental budget models, since it may contain a large
proportion of the total amount of a company's expenditures.
This budget is typically presented in either a monthly or quarterly format.
So, can conclude that The budget regarding the costs in the factory issued by the company
in the framework of the production process, except for direct raw material costs and direct
labor costs.
Example of the Manufacturing Overhead Budget
The administrative salaries line item contains the wages paid to manufacturing supervisors,
the purchasing staff, production clerks, and logistics planning staff, and gradually
increases over time to reflect changes in pay rates. The depreciation expense is relatively
fixed, though there is an increase in the third quarter that reflects the purchase of new
equipment. Both the freight and supplies expenses are closely linked to actual production
volume, and so their amounts fluctuate in conjunction with planned production levels. The
rent expense is a fixed cost, but does increase in the fourth quarter to reflect a scheduled
rent increase.

B. THE GOAL OF OVEHEAD COST BUDGET

1. Knowing the use of costs more efficiently.
2. Determine the cost of the product more precisely.
3. Knowing the allocation of factory overhead costs in accordance with the place
(department) where fees are charged.
4. As a monitoring tool for factory overhead costs.
C. DEFINING FACTORS
1. Budget unit to be produced.
2. Standards for charging fees set by the company.
3. Wage payment system used by companies.
4. Depreciation method used by companies.
5. Cost allocation method used by the company.

D. TYPES OF OVERHEAD COST

1. Fixed Costs are fees that are determined by the management, either in the factory or in
production or top management. Example: Salary expense, Tax Insurance, and Depreciation
2. Variable costs are determined based on certain rates adjusted for future conditions, example
Direct raw material costs, Direct labor costs, Power (power / electricity) used in the production
process
3. Semivariable costs will be determined by analyzing costs in the past several periods, then
grouping them into fixed costs and variable costs. Example: Indirect labor costs, Maintenance
cost, Equipment costs, and Indirect raw material costs

E. DEPARTEMENTS IN CHARGE OF PLANNING COST

1. Production Department
That is the part in the factory that works to process materials raw into finished goods or final
products.
2. Department of Services
That is the part of the factory that provides its services and indirectly participates in the role
of the service production process provided.
2 kinds of factory overhead costs, namely:
Direct BOP in Production Department AND Indirect BOP in the Department of Services
F. HOW TO DETERMINE AMOUNT OF BUDGET

CHASE EXAMPLE 1
During the production process, in the service / helper section an overhead fee of Rp. 1,500,000
will arise. The services provided are used by several parts in proportion:
Production I = 40%
Production II = 25%
Production III = 35%
Based on the proportion of the use of these services, calculate the overhead costs to each section !
ANSWER OF CHASE EXAMPLE 1
Overhead costs can be allocated to each section:
CHASE EXAMPLE 2
PT EVO during 2017 it is estimated that the following overhead costs will arise:
Production Section: Production I = Rp. 15,000,000
Production II = Rp.22,000,000
Production III = Rp. 16,000,000
Service / helper section: Service / helper section I = Rp. 1,800,000
Service / auxiliary part II = Rp. 4,500,000
The service section is used by the three parts of the production with the following proportions:

ANSWER OF CHASE EXAMPLE 2

The service / auxiliary part overhead can be allocated as follows:
G. DEFINING FACTORS
Is a unit used to determine the number of activities that have been carried out by the production
and service parts, in the framework of the production process.
This unit is very necessary in the preparation of BOP budgets, because basically the BOP is
the result of multiplication between units of activities with a certain rupiah as the overhead
rate.
Production Section:
Unit of goods produced, DLH, DMH, and Direct labor costs.
Service / helper section:
Direct repair hours (DRH)
KWH, for the power plant section
Value of purchase of raw materials, for the purchase section

CHASE EXAMPLE 3
PT OPTIMA produces 2 types of goods, namely A and B. Data on production plans and service /
auxiliary parts:

There are 2 parts of production, namely the production part I and II, as well as the service / auxiliary
section, namely the reparation section. The production part I is only passed by item A, while the
production part II is passed by both types of goods (A and B). The unit of activity for each section
is as follows:
The standard numbers in production section II are:

Standard number of reparation section:

Overheads that will arise in each section:

From the raw material budget data is obtained about the planned raw material costs for each type
of goods as follows:

Whereas from the budget the labor costs obtained data about the plan of direct labor costs for each
type of goods as follows:

From the available data above, calculate the cost of production

each item !
ANSWER OF CHASE EXAMPLE 3
Calculate the level of activity of each part first:

So the level of activity of each part is:

Production I = 7000 unit item A
Production II = 40.000 DMH
Reparation = 4.200 DRH
After that, the overhead costs for each part of production are calculated as follows:

Cost of Production of Goods A and B: