Factory overheads cost ratio

This quotient portrays the relationship between factory overhead cost and sales volumes especially in a making set up. The ratio is as follows;

Applicability of Factory Overhead Cost Ratio in Decision Making by Management

Overhead cost policy-the management need to set up a policy to ensure that the overhead cost is demarcated into fixed and variable overhead costs so as to effectively allocate and apportion the same to avoid over and or under absorption.

About the Author - Dr Geoffrey Mbuva(PhD-Finance) is a lecturer of Finance and Accountancy at Kenyatta University, Kenya. He is an enthusiast of teaching and making accounting & research tutorials for his readers.