As far as I know there is only an overhead absorption rate and a full absorption rate. The alternative being marginal costing. There are 3 methods of absorption costing. These being Activity, Time and Efficiency but I'm not sure what you are asking exactly.
method of overhead absorption
In absorption costing, overhead absorption rate or blanket rate is key to spread all overheads on production of volume of product, because if we don't have the overhead absorption rate manufacturing overhead cannot be spread or there is no basis for allocation of overheads on manufactured units.
Blanket overhead absorption rate is the rate used to allocate total overhead costs to number of produce units in traditional accounting system
One disadvantage to using a predetermine overhead absorption rate is the fact that the rate may be too much for any particular product. If this happens, then the price of the product will be too much.
Overhead rate : Overhead rate = total overhead cost / direct labor OR Overhead rate = Total overhead cost / machine hours.
As far as I know there is only an overhead absorption rate and a full absorption rate. The alternative being marginal costing. There are 3 methods of absorption costing. These being Activity, Time and Efficiency but I'm not sure what you are asking exactly.
method of overhead absorption
In absorption costing, overhead absorption rate or blanket rate is key to spread all overheads on production of volume of product, because if we don't have the overhead absorption rate manufacturing overhead cannot be spread or there is no basis for allocation of overheads on manufactured units.
In Blanket Overhead Absorption Rate applied is the same however it may differ if a company follow Departmental method Or frther break - up method
Blanket overhead absorption rate is the rate used to allocate total overhead costs to number of produce units in traditional accounting system
The advantage of using blanket overhead absorption rate is that budgeting and costing become simpler. One disadvantage however is that it is harder to know which of the costs centers is consuming most of the money allocated.
One disadvantage to using a predetermine overhead absorption rate is the fact that the rate may be too much for any particular product. If this happens, then the price of the product will be too much.
basically yh fam, mans got this question aswell, so good try! call me sometime! villa 4 champions league!
Absorption method is that in which predetermined overhead rate is use to allocate all overheads to departments or activities.
The benefit of determining overhead absorption rates, according to departments is that it is usually hard to pin certain overhead costs to specific products. It is better for each department to relate to a certain overhead than a specific product.
Departmentalisation of overhead means allocation of overhead cost base on predertmined rate in case of absorption method and based in activities in case of activity based costing.