Management Accouting

High School ・Business ・APA ・2 Sources

Determining the overhead application rate of Finlon Upholstery Inc. The rate a company applies during an estimation of its total overheads is described as Overhead application rate (Kaplan, 2015). The materials used is the best way in our case to determine the absorption rate, giving the following results
Direct material used
Total overheads
Overhed Abs. rate
This table explains that the absorption rate is $ 3.154286, and that the rate has been applied across various overheads to estimate the total overhead.
Additions to work In Progress inventory account
Work in Progress

Work in Progress at the beginning of the year


Direct materials used during the year


Indirect materials used


Unsold job during the year


Additions to the work in progress


From the above table, it is clear that the value of the additions made to the work in progress was 5,665,800

Calculation of Finished Goods Inventory

Direct Materials


Direct Labour


Indirect materials


Indirect Labour


Finished goods inventory


The above figure is gotten by adding direct materials, and direct labor

Determination of over/ Under Applied Overhead rate

Budgeted Labour overheads


Actual Labour Overheads


Over/Under applied


From the table above its clear that the overhead rate is 150,000 on the negative side

The selling and administration expenses should not be included in the cost of goods sold category. This is because cost of goods is the cost at which the Company acquired its materials from suppliers and as such does not include operating and general expenses (Garrison, 2014).


Garrison, R. H. (2014). Managerial accounting. New York: McGraw-Hill/Irwin.

Kaplan, R. S. (2015). Advanced management accounting. PHI Learning.

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