Computation of overhead recovery rate, Cost Accounting

Compute the rate to be used in each department for applying overhead in both departments

Budegeted Cost sheet
	Amount in $
	Dept. A	Dept. B
Direct materials	120,000	150,000
Direct labor	37,500	145,000
Prime Cost	157,500	295,000
Overheads	122,500	100,000
Total Product cost	280,000	395,000

2	Computation of total budgeted labor cost for department B
		Amount in $
		Dept. B
	Total product cost	395,000
	Less: direct materials	150,000
	Less: Overheads	100,000

	Budgeted labor cost for department B	145,000


	Computation of overhead recovery rate:
		Dept. A	Dept. B
	Total overheads (a), $	122,500	100,000
	Basis of recovery	labour hours	machine hours
	Budegted labor / machine hours (b)	2,500	5,000
	Overhead recovery rate (a/b)	49.00	20.00

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