MSB Accounting Students Help with Headaches about Overhead

Posted by on June 5, 2014

Students in Managerial Accounting at Minnesota School of Business-Plymouth had the opportunity to apply their knowledge of managerial accounting through a partnership with WingLites, a small aftermarket manufacturer of motorcycle accessories. Managerial Accounting is the discipline of using accounting techniques to help businesses make managerial decisions that would reduce costs and increase profits. This project focused on the overhead costs of WingLites.


Accounting Program

Plymouth Applied Learning Project for WingLites

Accounting program

Ted Harper, WingLites


To a small manufacturer, getting an accurate measurement of production costs are vital. Data about direct materials and direct labor cost are readily available. They can be easily tracked with every job order. Overhead costs are more challenging to identify and track. These costs are often hidden in miscellaneous activities that are not directly associated with the manufacturing process; nevertheless, they support the business and do add up.

Ted Harper, WingLites

Some examples of overhead costs include cost of the work space, electricity, tools, telephones and support computers. After uncovering and tracking these costs, the problem remains as to how much overhead costs should each job order be allocated. Only then is the true cost of production known and profit can be calculated.

Ted Harper, sole proprietor of WingLites, shared his business processes and cost data with the class. The class then used this information to create an Excel spreadsheet that tracked overhead costs, calculated an allocation rate based upon direct labor hours as a cost driver, and provided a job based overhead allocation. Leslie Koshenina, one of the students in the project stated, “Beyond the Excel programming of the calculations, our biggest issue was to classify what types of overhead costs WingLites had and how to account for them. For example, since Winglites is a sole proprietorship run out of a residence, provisions were made that data from Mr. Harper’s tax returns could easily utilize.”

Ron Myszkowski, the course instructor said, “Applied learning projects like this allow the students to leave the textbook where problems are defined in a nice little paragraph with simple, sanitized data, and move into the real world, where the problem is discovered by the interaction with the client, the data is complex and confusing. Students who do well in this environment will have a bright future.”


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