Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 38

What is the purpose of having two manufacturing overhead accounts, the Manufacturing Overhead Control and Applied Manufacturing Overhead?

Step 1 of 2

Manufacturing Overhead Control account is prepared by accumulating manufacturing overhead cost including Indirect Material and Indirect Labour.

This account is prepared for each department and the departmental manager is held responsible for the departmental overhead costs.

This stage of cost allocation allocates costs from the accounts in which they were initially entered by departments.

Therefore the purpose of manufacturing overhead control account is to help top management evaluate how well department manager’s control costs.