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Plantwide Overhead Rate Calculator Online

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The Plantwide Overhead Rate Calculator serves as a pivotal tool for businesses, especially in the manufacturing sector. It accurately distributes overhead costs—expenses not directly tied to production like utilities and equipment maintenance—across products. This allocation is crucial for pricing, budgeting, and financial analysis, ensuring companies maintain profitability and competitive pricing.

Formula of Plantwide Overhead Rate Calculator

To understand the plantwide overhead rate calculation, consider the following formula:

Plantwide Overhead Rate = Total Manufacturing Overhead Costs / Total Amount of Allocation Base

  • Total Manufacturing Overhead Costs are the sum of all production-related expenses not directly associated with materials or labor. This includes:
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Total Manufacturing Overhead Costs = Indirect Materials + Indirect Labor + Other Overhead Costs

  • Total Amount of Allocation Base varies but typically involves direct labor hours, machine hours, or direct labor costs. This base provides a fair method for allocating overhead across different products or services.

Table for General Terms and Calculations

Manufacturing SectorAverage Plantwide Overhead RateAllocation Base Used
Automotive$45 per machine hourMachine hours
Textiles$30 per direct labor hourDirect labor hours
Electronics$50 per machine hourMachine hours
Furniture$25 per direct labor hourDirect labor hours
Chemicals$40 per machine hourMachine hours
Food Processing$20 per direct labor hourDirect labor hours

Example of Plantwide Overhead Rate Calculator

Imagine a company with $100,000 in total manufacturing overhead costs and 50,000 machine hours as its allocation base. The plantwide overhead rate would be:

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$100,000 / 50,000 hours = $2 per machine hour

This means for every machine hour worked, $2 of overhead costs are allocated.

Most Common FAQs

Q1: Why is the plantwide overhead rate important?

A1: It ensures that overhead costs are fairly allocated across all products, helping businesses price their products accurately and maintain profitability.

Q2: Can the allocation base vary between businesses?

A2: Yes, businesses may choose different bases (e.g., direct labor hours, machine hours) depending on which most accurately reflects their operations and cost structure.

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