Question

Manufacturers follow four steps to implement a manufacturing overhead allocation system. The last step is?

1) Calculate the predetermined overhead rate
2) Allocate the manufacturing overhead to individual products
3) Determine the total manufacturing overhead cost
4) Assign the manufacturing overhead to cost objects

Answer 1

The last step in the implementation of a manufacturing overhead allocation system is to assign the manufacturing overhead to cost objects. This ensures accurate distribution of overhead costs to the actual units of product made.

Step-by-step explanation:

Manufacturers implement a manufacturing overhead allocation system following several critical steps. The last step in this process is to assign the manufacturing overhead to cost objects. This involves applying the previously calculated predetermined overhead rate to the actual units produced, allowing for a reasonable estimation of the overhead costs for each unit or batch of product.

Throughout this process, manufacturers will calculate total costs including fixed and variable costs, analyze short-run costs, and determine their cost structures. This comprehensive approach helps in understanding the link between production and overhead costs, as well as establishing accurate pricing and cost control strategies.