What you expect a period's overhead to cost, and the output volume you expect to spread it over. Together they set the standard overhead rate per unit.
When to use it
At the start of each month or year, so that you can later see whether the period absorbed more or less overhead than it actually incurred.
Before you start
The account head holding the overhead pool should already exist if you want to budget one pool at a time. You need the costing or manufacturing setup role.
Where to find it
Masters > Manufacturing > Overhead Budget.
The fields on this screen
| Field (on screen) | What to enter | Required |
|---|---|---|
| Period Type (month/fy) | Whether this line budgets one month or a whole fiscal year. Type month or fy. | No |
| Period End | Last day of the period this budget covers. Absorption is compared period by period on this date. | No |
| Cost Element Type | Which kind of cost this budget is for. Leave it blank when the figure covers the whole pool. | No |
| Pool Ledger (id) | Limit this line to one overhead account. Leave it blank to budget the whole pool for the period. | No |
| Budgeted Amount | Overhead you expect to spend in this period. Divided by the budgeted volume it gives a standard rate. | No |
| Budgeted Volume | Output you expect in this period. Leave it at zero and the standard rate works out as zero. | No |
How it works
A budget posts nothing to the accounts. It is read by the Overhead Absorption report, which:
- divides the budgeted amount by the budgeted volume to get a standard rate per unit;
- multiplies that rate by the period's actual output;
- compares the result with the overhead actually charged to production in the period.
The difference is the period's under or over absorption. If a period has no budget, it has no absorption line at all.
Watch out when a period has several rows. The budgeted amounts are added together, but the budgeted volumes are not: only the largest volume entered for the period is used. So either keep one row per period, or put the same volume on every row of that period.
Tips and common mistakes
- Period End must be the last day of the period you are budgeting. The report matches on that date, so a date in the middle of a month lines up with nothing.
- Period Type is typed by hand and is not checked. Enter month, or fy for a full year.
- The rate is divided by Budgeted Volume. Leave it at zero and the standard rate is zero, so nothing is ever shown as absorbed.