## Factory Overhead Absorption Methods/Methods for FOH Application

### 1. Direct Material Cost Basis

Direct material cost basis = (Estimated FOH for the period / Estimated D.M. cost) x 100

### 2. D.L. Cost Basis

D.L. Hours Basis = (Estimated FOH for the period / Estimated D.L. Cost) x 100

### 3. D.L. Hours Basis

(Estimated FOH for the period / Estimated D.L. hours) = Per D.L. hour

### 4. Machine Hours Basis

(Estimated FOH for the period / Estimated machine hours) = Per machine hours

### 5. Prime Cost Basis

= (Estimated FOH for the period / Estimated prime cost) x 100

### 6. Conversion Cost Basis

= (Estimated FOH for the period / Estimated conversion cost) x 100

### 7. Units of Production Basis

= (Estimated FOH for the period / Estimated No. of units) x 100

## Factory Overhead Variance Formulas

### 1. FOH Applied Rate/Burden Rate

= Estimated FOH for normal volume / Normal volume

### 2. Applied FOH for Capacity Attained/Actual Capacity

= Capacity attained x FOH applied rate

### 3. Variable Cost Rate/V.C.R.

= Estimated variable cost for normal volume / Normal volume

### 4. Variable Cost for Capacity Attained

= Capacity attained x Variable cost rate

### 5. Spending variance/Budget/Expense variance

= Actual FOH – Budgeted allowance

### 6. Capacity Variance/Volume Variance/Idle Capacity Variance

= Applied FOH for capacity attained – Budgeted allowance

### 7. Budgeted Allowance

= Fixed cost + Variable cost for capacity attained

### 8. Capacity Attained/Actual Capacity/Actual Output

= Applied FOH for capacity attained / FOH applied rate

### 9. Normal Volume/Standard Activity Level

= Fixed cost / Fixed cost rate

### 10. Over Applied/Under Applied FOH

= Actual FOH – Applied FOH for actual output

### 11. Variable Cost Rate (For Low & High Point Method)

= Difference in budgeted FOH / Difference in activity level