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Submitted By mahbubthezion

Words 578

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Words 578

Pages 3

The definition for overhead is easy. Here it is……

If a cost is not direct labor or direct materials, the cost is overhead.

In other words, overhead is a multitude of different costs including indirect labor and indirect materials. Here are a few of many examples: electricity, property taxes, advertising, accounting, janitors, cleaning supplies, distribution costs, legal fees, interest, inspectors, human resources department, etc, etc, etc.

Life would be too easy if it were just that simple. There is one wrinkle. There is a distinction between between overhead and manufacturing overhead.

Factory Overhead is not a financial statement account

It is a “suspense account” for capturing and reallocating overhead costs

Factory Overhead is debited for actual overhead costs incurred

Factory Overhead is credited to allocate overhead to production

Regression Analysis

Interpretation of output summary

The regression model like that,

Here, Y= Cost of production

A= Constant b1,b2 &b3= Regression coefficient

X1= Direct Materials

X2 = Direct Labor

X3= Factory overhead

From the co-efficient table, the values of a, b1,b2& b3 are found out & the regression model can be written as follows:

Y= a+b1x1+b2x2+b3x3

= -6537089.828+.248×1+38.489×2+12.326×3

This equation indicates that if taka of direct materials increases by 1taka, the cost production will increases by .248 taka and other things remain constant.

Again, if taka of direct labor increases by 1 taka, the cost of production will increases by 38.489 taka and other things remain constant.

On the other hand, if taka of factory overhead increases by 1taka, the cost of production will increases by 12.326 taka and other things remain constant.

The relationship among the variables in relative term

The relationship among the variables in relative terms can be estimated with...

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