overhead expenditure that is fixed in the short term remains constant each month but 610131

The fixed overheads for Euro are £24 000 000 per annum,- and monthly production varies from 400 000 to 1 000 000 hours. The monthly overhead rate for fixed overhead will therefore fluctuate as follows:

Overhead expenditure that is fixed in the short term remains constant each month, but monthly production fluctuates because of holiday periods and seasonal variations in demand. Consequently the overhead rate varies from £2 to £5 per hour. It would be unreasonable for a product worked on in one month to be allocated overheads at a rate of £5 per hour and an identical product worked on in another month allocated at a rate of only £2 per hour.