Overhead

distribution
epartmentaIization
1 Process of dividing the factory into number
of Segments Is caIIed epartmentaIization
P1
S1
P2 P3
S1
Prod epartments
Service ept.
epartmentaIization
2 Process of aIIocating and apportioning
POHEs to different departments or
cost centers (Prod & Service )
P1
S1
P2 P3
S1
Prod epartments
Service ept.
Factory
Overheads
epartmentaIization
P1
S1
P2 P3
S1
Prod epartments
Service ept.
Factory
Overheads
AIIocation &
Apportionment
Service epartments
Time-Keeping
Repair
epartment
Maintenance
epartment
Canteen
Purchase
TooI Room
BoiIer
House
PersonneI
epartment
Power House
Fire Protection
Stores
Transport
istribution of
Overhead
ALLOCATON
APPORTIONMENT
Specific
Costs
Common
Costs
istribution of
Overhead
ALLOCATON
Specific
Costs
AIIocating whoIe
amount Of an item
of POHs to the
department for which
The expenditure was
incurred
istribution of
Overhead
APPORTIONMENT
Common
Costs
Common costs are apportioned
Amongst different departments
or cost centers on some basis
PrincipaI Basis of Apportionment Of Overheads
FIoor Area
CapitaI VaIue Of Assets
Number Of EmpIoyees
Machine Hours
irect Labour Hours
Light Points
KiIowatt Hours
TechnicaI AnaIysis
BASIS FOR APPORTIONMENT
Rent, Rates & Taxes, Lighting & Heating
Insurance & depreciation of BuiIding,
Cost of repairs & maintenance of
BuiIding, Air Conditioning
FIoor Area
Occupied
Insurance & epreciation on PIant &
Machinery, maintenance of PM,
Insurance on buiIding, etc
CapitaI
VaIue
BASIS FOR APPORTIONMENT
No.Of
EmpIoyees
Repairs & Maintenance of PIant &
Machinery
Machine
Hours
WeIfare Expenses, time-Keeping ,pay-roII
Office, Canteen, Recreation, Supervision
MedicaI Expenses
BASIS FOR APPORTIONMENT
Light Points
Or
KiIowatt Hours
irect
Labour
Hrs
Work's Manager's Remuneration, SaIary of
Supervisors etc
EIectricity Charges
BASIS FOR APPORTIONMENT
TechnicaI
Estimate
Where not possibIe to apportion on some
Bases TechnicaI estimate is made
Horse
Power
Motive Power Expenses
BASIS FOR APPORTIONMENT
Store Keeping Expenses
VaIue or
Weight of
MateriaIs
Transport Service Expenses
Truck MiIeage
Tonnage
Truck Hours
No.Of Pakages
PRINCIPLES OF APPORTIONMENT PRINCIPLES OF APPORTIONMENT
UtiIity UtiIity or or
Service Service
PrincipIe PrincipIe
AbiIity To Pay AbiIity To Pay
Survey Method Survey Method
Efficiency Efficiency
PrincipIe PrincipIe
PRINCIPLES OF APPORTIONMENT PRINCIPLES OF APPORTIONMENT
UtiIity UtiIity or or
Service Service
PrincipIe PrincipIe
Service or Benefits
received
By the department
PRINCIPLES OF APPORTIONMENT PRINCIPLES OF APPORTIONMENT
AbiIity To Pay AbiIity To Pay
What the Traffic can bear What the Traffic can bear
Basis of SaIes or Profit Basis of SaIes or Profit
PRINCIPLES OF APPORTIONMENT PRINCIPLES OF APPORTIONMENT
Survey Method Survey Method
When ifficuIt to seIect Basis When ifficuIt to seIect Basis
Production Manager's SaIary Production Manager's SaIary
(Time spent in Each ept) (Time spent in Each ept)
PRINCIPLES OF APPORTIONMENT PRINCIPLES OF APPORTIONMENT
Efficiency Efficiency
PrincipIe PrincipIe
Out put as the basis Out put as the basis
Higher Production Higher Production
Low Overhead Rate Low Overhead Rate
Low Production Low Production
High OH Rate High OH Rate
"uick Check
dentify the Basis for following Overheads
Rent
PIant Repairs
Power
epreciation of BuiIding
BuiIding Repairs
Insurance Of BuiIding
Fire Insurance of Stock
Lighting Expenses
Supervision
Power
ESI
EmpIoyer's Cont. to PF
Amenities To Staff
Canteen
Gn. Overheads
FIoor Area
VaIue of PIant
Machine Hours/HP/VM
VaIue Of BuiIding
VaIue Of BuiIding
FIoor Area
VaIue Of Stock
No.Of Light Points
No.Of EmpIoyees
KiIowatt/VaIue of PIant
irect Wages
irect Wages
No.Of EmpIoyees/Wages
No.Of EmpIoyees
irect Wages
Summary Of epartmentaI Overhead istribution
!articulars Basis
Total
(Rs)
Production epartments
A B C D
(Rs) (Rs) (Rs) (Rs)
Rent Area(15:11:9:5) 2,000 750 550 450 250
PIant Maintenance VaIue Of Mch. (4:3:2:1) 1,200 480 360 240 120
epreciation VaIue Of Mch. (4:3:2:1) 900 360 270 180 90
Lighting Area(15:11:9:5) 200 75 55 45 25
Insurance Stock VaIue(5:3:2) 1,000 500 300 200 --
EmpIoyer's Cont to PF Wages (4:3:2:1) 300 120 90 60 30
Energy VaIue Of Mch. (4:3:2:1) 1,800 720 540 360 180
Supervision No.Of Emp (6:4:3:2) 3,000 1,200 800 600 400
Total 10,400 4,205 2,965 2,135 1,095
Summary Of epartmentaI Overhead istribution
!articulars Basis
Total
(Rs)
Production ept.
A B C D
(Rs) (Rs) (Rs) (Rs)
S
Rent Area 10,000 3,750 2,750 2,250 1,250
Repairs To !lant Value Of !lant 6,000 2,400 1,800 1,200 600
Depreciation " 4,500 1,800 1,350 900 450
Lighting Light !oints 1,000 375 275 225 125
Supervision No Of Employees 15,000 6,000 4,500 3,000 1,500
Fire nsurance Value Of Stock 5,000 2,500 1,500 1,000 -
!ower Value Of !lant 9,000 3,600 2,700 1,800 900
ES Wages 1,500 600 400 300 200
TotaI 52,000 21,500 15,27510,675 5,025
Redistribution of Overheads
Reapportionment of Overheads
Secondary istribution Of Overheads
ON KHALD AZZ
ACCOUNTNG(FNANACAL & COST) OF
CMA! STAGE 1,2,3,4 (NEW CLASSES)
CA..MODULE B,C,D
!!FA (FOUNDATON,NTERMEDATE,FNAL)
ACCA-F1,F2,F3
BBA,MBA
B.COM(FRESH),M.COM
MA-ECONOMCS..O/A LEVELS
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Production
epartments
Service
epartments
Carry out the
centraI purposes
of an organization.
Provide support
that faciIitates the
activities of production
departments.
Service Department Cost
Re-Apportionment
First, we identify the factor
that drives costs in the
service department.
This cost driver is used
as the apportionment base.
The Need for Cost
Re-Apportionment
How are service
department costs
charged to operating
departments?
The Need for Cost Apportionment
Second, we measure the
consumption of the
apportionment base in the
operating departments.
The Need for Cost Apportionment
Third, we apportion
the service
department cost
based on the
reIative amount of
the apportionment base
used in each
operating department.
What happens to
service department
costs after they
are apportioned to
operating
departments?
The Need for Cost Apportionment
Apportioned service department
costs become a part of
the overhead in each
operating department.
The Need for Cost Apportionment
First Stage Apportionment
Service department costs are
apportioned to operating
departments.
Service
Department
(Cafeteria)
Service
Department
(Accounting)
Service
Department
(!ersonnel)
Operating
Department
(Machining)
Operating
Department
(Assembly)
The
!roducts
The Need for Cost Apportionment
Service
Department
(Cafeteria)
Service
Department
(Accounting)
Service
Department
(!ersonnel)
Operating
Department
(Machining)
Operating
Department
(Assembly)
The
!roducts
Second Stage Apportionment
Operating department overhead costs and
apportioned service department costs are
appIied to products.
Selecting Apportionment Bases
PersonneI:
Number of
empIoyees
Receiving:
Units
handIed
Security:
Square
footage
Power:
KiIowatt
hours
Cafeteria:
Number of
empIoyees
CustodiaI:
Square
footage
Accounting:
Staff
hours
Criteria
Easiest
Re- apportionment Basis
Purchase
epartment
Stores
No of Purchase Orders or vaIue of MateriaIs
Purchased for each Production epartment
WVaIue or "uantity of MateriaIs Issued
WNo. Of MateriaIs Requisitions
Re- apportionment Basis
InternaI Transport
inspection
Inspection Hrs. evoted to each
epartment
Weight & istance
Re- apportionment Basis
Time Keeping,
Security
Canteen
WeIfare
Recreation
MedicaI
PersonneI
Pay RoII
WNumber Of EmpIoyees
WTotaI Labour Hours or
WWages or SaIaries
Re- apportionment Basis
Maintenance
epartment
Factory
Office
No .Of EmpIoyees
Hrs. evoted or Worked for
Each epartment
Re- apportionment Basis
BuiIding
Service eptt
BoiIer
House
% Of Steam UtiIized
ReIative Area Of Each eptt
nterdepartmental Services
ProbIem
Re Apportioning costs when service departments
provide services to each other
ProbIem
Re Apportioning costs when service departments
provide services to each other
SoIutions
irect Method
Step method
ReciprocaI method
Direct Method
Service
Department
(Cafeteria)
Service
Department
(Custodial)
Operating
Department
(Machining)
Operating
Department
(Assembly)
nteractions
between service
departments are
ignored and all
costs are
allocated directly
to operating
departments.
Direct Method Example
Service epartment Apportionment Base
Cafeteria Number of empIoyees
CustodiaI Square feet occupied
Direct Method Example
Direct Method Example
Apportionment base: Number of empIoyees
INR 360,000
20
20 + 30
= INR 144,000
Direct Method Example
Apportionment base: Number of empIoyees
INR 360,000
30
20 + 30
= INR 216,000
Direct Method Example
INR 90,000
25,000
25,000 + 50,000
= INR 30,000
Apportionment base: Square feet occupied
Direct Method Example
Apportionment base: Square feet occupied
50,000
25,000 + 50,000
INR 90,000 = INR 60,000
Items
Basis TotaI
(Rs.)
Production epartment Service epartment
P
1
P
2
P
3
Office Worksho
p
Indirect wages
Indirect materiaIs
GeneraI overhead
Amenities to staff
EmpIoyer's
contribution to E.S.I.
Power
epreciation
Apportionment of
workshop overhead
Apportionment of
office overhead
ActuaI
ActuaI
irect wages
(4:5:6)
No.of empIoyees
(6:5:6:3:5)
irect Wages
(4:5:6)
H.P. of machine
X
Machine hours
worked
(6:16:15:1)
15% of vaIue of
machinery
Machine hours
(2:4:3)
irect wages
(4:5:6)
25,000
10,950
1,500
12,500
1,200
3,800
15,750
3,000
2,000
400
3,000
320
600
4,500
3,000
3,000
500
2,500
400
1,600
5,250
4,000
3,000
600
3,000
480
1,500
3,750
10,000
1,100
-
1,500
-
-
-
5,000
1,850
-
2,500
-
100
2,250
70,700 13,820
2,600
3,360
16,250
5,200
4,200
16,330
3,900
5,040
12,600
-
(-12,600
11,700
(-) 11,700
-
AIIocated overhead TotaI 19,780 25,650 25,270 - -
Overhead AnaIysis Sheet
Bharat Engineering Works epartmentaI
Overhead istribution Statement (For 12 Months)
ParticuIars of
Expenses
Basis of
istribution
TotaI
Rs.
Production eptts. Service
ept.
A B C S
Rent
Power
Indirect wages
epreciation of
machinery
EIectricity
Canteen
expenses
irect wages
FIoor space
(30:25:45:20)
H.P. of machine
(65:30:30:40)
irect Wages
(12:14:18:8)
VaIue of machine
(50:60:80:10)
Light points
(7:7:9:5)
No. of workers
(2:3:6:2)
ActuaI
36,000
8,250
5,200
22,000
5,600
6,500
8,000
9,000
3,250
1,200
5,500
1,400
1,000
---
7,500
1,500
1,400
6,600
1,400
1,500
---
13,500
1,500
1,800
8,800
1,800
3,000
---
6,000
2,000
800
1,100
1,000
1,000
8,000
91,550 21,350
+5,970
19,900
+3,980
30,400
+9,950
19,900
-19,900
Re-distribution of expenses of service
department to the production departments on
the basis of service rendered 30%: 20%:50%
AIIocated overhead totaI (A)
Effective Iabour hours (see workings)
(No. of worker x working hours) (B)
27,320 23,880 40,350 NiI
3,200 4,800 9,600
Labour hour rate (A B) 8.5375 4.975 4.203
Operating
Department
(Machining)
Operating
Department
(Assembly)
Step Method
Once a service
department's costs
are apportioned,
other service
department costs
are not allocated
back to it.
Service
Department
(Cafeteria)
Service
Department
(Custodial)
Step Method
Service
Department
(Cafeteria)
Service
Department
(Custodial)
Operating
Department
(Machining)
Operating
Department
(Assembly)
Custodial will
have a new
total to Apportion
to operating
departments; its
own costs plus
those costs
allocated from
the cafeteria.
Step Method
1 Identify the S which renders service to Iarger No's of other eptts
2 istribute its Costs to other eptts , IncIuding service epartment
3 Identify the next service epartment. Which renders service to the
next Iargest No's
4 Continue the process tiII Amount is Exhausted
5 If aII S renders service to = No of epartments. Than cost of S
with Iargest amount be taken first
ON KHALD AZZ
ACCOUNTNG(FNANACAL & COST) OF
CMA! STAGE 1,2,3,4 (NEW CLASSES)
CA..MODULE B,C,D
!!FA (FOUNDATON,NTERMEDATE,FNAL)
ACCA-F1,F2,F3
BBA,MBA
B.COM(FRESH),M.COM
MA-ECONOMCS..O/A LEVELS
KHALD AZZ... 0322-3385752
0312-2302870
0300-2540827
Step Method Example
Service epartment Apportionment Base
Cafeteria Number of empIoyees
CustodiaI Square feet occupied
We wiII use the same data used
in the direct method exampIe.
Step Method Example
Apportion Cafeteria costs first since
it provides more service than Custodial.
Apportion Cafeteria costs first since
it provides more service than Custodial.
Step Method Example
INR 360,000
10
10 + 20 + 30
= INR 60,000
Apportionment base: Number of empIoyees
Step Method Example
INR 360,000
20
10 + 20 + 30
= INR 120,000
Apportionment base: Number of empIoyees
Step Method Example
INR 360,000
30
10 + 20 + 30
= INR 180,000
Apportionment base: Number of empIoyees
Step Method Example
New totaI = INR 90,000 originaI custodiaI cost
pIus INR 60,000 apportioned from the cafeteria.
Step Method Example
INR 150,000
25,000
25,000 + 50,000
= INR 50,000
Apportionment base: Square feet occupied
Step Method Example
INR 150,000
50,000
25,000 + 50,000
= INR 100,000
Apportionment base: Square feet occupied
Comparison of Methods
SECONARY OVERHEA ISTRIBUTION SUMMARY
ParticuIars TotaI Rs.
Base Service epartments (Rs.) Production epartments
P " R S X Y Z
Factory
overhead
Add :
Service
ept.costs
P
"
R
S
5,95,000
0
0
0
0
Given
No. of
EmpIoyees
(50:40:50:
100:125:85)
LHs
Rs.80,000 in
(6:3:4:3:4)
Area
(Rs.1,33,000
in
(10:30:15:
15)
LHs
(Rs.66,000
in 4:3:4)
45,000
-45,000
75,000
5,000
-80,000
1,05,000
4,000
24,000
-1,33,000
30,000
5,000
12,000
19,000
-66,000
1,93,000
10,000
16,000
57,000
24,000
64,000
12,500
12,000
28,500
18,000
83,000
8,500
16,000
28,500
24,000
TotaI
OHEs of
prod.depts
5,95,000 3,00,000 1,35,000 1,60,000
Reciprocal Services Method
nterdepartmental
services are given
full recognition
rather than partial
recognition as with
the step method.
Service
Department
(Cafeteria)
Service
Department
(Custodial)
Operating
Department
(Machining)
Operating
Department
(Assembly)
Because of its mathematical complexity,
the reciprocal method is rarely used.
ReciprocaI Services Methods
TriaI & Error
Method
Repeated
istribution
Method
AIgebraic
SimuItaneous
Equation
Method
ReciprocaI Services Methods
TriaI & Error
Method
Cost Of one Service ept (Say A ) is apportioned
To another Service ept (Say B) based on service rendered
The cost of another dept (B) pIus its share
In the cost of first service department (A)
Is again apportioned to first service department
The amount so apportioned to A wiII again be apportioned
to the service department B
The process continues tiII amount becomes negIigibIe
Service epartments (Rs)
X Y
CaIcuIation Of TotaI Costs Of Service epartments
TotaI Exp as per Primary istribution 23,400 30,000
Charge 10% 0f Rs 23,400 (X) to Y 2,340
20% of Rs.32,340 (Y) to X 6,468
10% of Rs.6,468 (X) to Y 647
20% of Rs.647 (Y) to X 129
10% of Rs.129 (X) to Y 13
20% of Rs.12 (Y) to X 3
(Since Rs.3 to be apportioned is very smaII
distribution process is stopped )
30,000 33,000
TotaI
Secondary Overhead Distribution Summary
ParticuIars
Production epartments
(Rs.)
TotaI Rs.
A B C
TotaI expenses as per primary
overhead distribution
summary
Add Service ept. Costs :
X : Rs.30,000 at 20%, 40%
& 30% to A,B, and C
Y : Rs.33,000 at 40%, 20%
& 20% to A, B & C
80,000
6,000
13,200
70,000
12,000
6,600
50,000
9,000
6,600
2,00,000
27,000
26,400
TotaI 99,200 88,600 65,600 2,53,400
ReciprocaI Services Methods
Repeated
istribution
Method
1 istribute the cost of a service ept . to the Production
and service department Using the percentage
2 Apportion the cost of 2
nd
service department (Aggregate)
to production and other service department as per % given
3 Use the same procedure with other service departments
tiII the cost of service departments become negIigibIe
"uestion
A factory is having 3 prod . epartments A,B & C, and 2 service
epartments BoiIer House and Pump Room. The boiIer house
was to depend upon the pump Room for suppIy of water and in turn ,
depends upon the boiIer house for suppIy of steam power for driving
the pump The expenses incurred by the production department
during the period are: A Rs 8,00,000,B Rs 7,00,000
And C Rs 5,00,000.The expenses of BoiIer house are Rs 2,34,000
and the Pump House Rs 3,00,000.The expenses of BoiIer House
and Pump house are Apportioned to the prod. departments
on the foIIowing basis
A B C BH PR
Expenses Of BoiIer House 20% 40% 30% - 10%
Expenses Of Pump Room 40% 20% 20% 20% -
ParticuIars TotaI
Rs
Basis
Prod epartments (Rs) Service ept (Rs)
A B C BoiIer Pump
P istribution 25,34,000 given 8,00,000 7,00,000 5,00,000 2,34,000 3,00,000
Add Service ept. Costs
BoiIer House 0 20:40:30:10 46,000 93,600 70,200 -2,34,000 23,400
Pump Room 0 40:20:20:20 1,29,360 64,680 6 4,680 64,680 -3,23,400
BoiIer House 0 20:40:30:10 12,936 5,872 19,404 -64,680 6,468
Pump Room 0 40:20:20:20 2,587 1,294 1,294 1,293 -6,468
BoiIer House 0 20::40:30:20 259 517 388 -1293 129
Pump House 0 40:20:30:20 52 26 26 25 -129
BoiIer House 0 20:40:20:20 5 10 8 -25 2
Pump House 0 40:20:20:20 1 1 0 0 -2
TotaI 25,34,000 9,92,000 8,86,000 6,56,000 0 0
Secondary Overhead istribution Summary
ReciprocaI Services Methods
AIgebraic
SimuItaneous
Equation
Method
WTotaI Costs of Service epartments are
Expressed in aIgebraic equation
WEquations are deveIoped on the basis of
Primary distribution & % of service rendered
to each other
WTotaI Costs of Service epartments can
Be caIcuIated by soIving E"UATIONS
AIgebraic Equation
X= OHE's + % of Y
Y= OHE's + % of X
Service epartment OHE'S can be apportioned
M N P R S
R 20% 30% 40% - 10%
S 30% 40% 10% 20% -
"uick Check Data
Allocation bases:
Business school administration costs (ADMN):
Number of employees
Business administration computer services
(BACS): Number of personal computers
The direct method of Apportionment is used.
"uick Check
How much cost wiII be apportioned from
Administration to Accounting?
a. INR 36,000
b. INR144,000
c. INR180,000
d. INR 27,000
How much cost wiII be apportioned from
Administration to Accounting?
a. INR 36,000
b. INR144,000
c. INR180,000
d. INR 27,000
How much cost will be apportioned from
Administration to Accounting?
a. NR 36,000
b. NR144,000
c. NR180,000
d. NR 27,000
How much cost will be apportioned from
Administration to Accounting?
a. NR 36,000
b. NR144,000
c. NR180,000
d. NR 27,000
"uick Check
INR180,000X
20
20 + 80
= INR 36,000
"uick Check
How much totaI cost wiII be apportioned
from AMIN and BACS combined to the
Accounting epartment?
a. INR 52,500
b. INR135,000
c. INR 270,000
d. INR 49,500
How much totaI cost wiII be apportioned
from AMIN and BACS combined to the
Accounting epartment?
a. INR 52,500
b. INR135,000
c. INR 270,000
d. INR 49,500
"uick Check
How much total cost will be apportioned from
ADMN and BACS combined to the Accounting
Department?
a. NR 52,500
b. NR 135,000
c. NR 270,000
d. NR 49,500
How much total cost will be apportioned from
ADMN and BACS combined to the Accounting
Department?
a. NR 52,500
b. NR 135,000
c. NR 270,000
d. NR 49,500
INR 90,000
18
18 + 102
= INR 13,500
"uick Check Data
Apportionment bases:
Business school administration costs (ADMN):
Number of employees
Business administration computer services
(BACS): Number of personal computers
The step method of apportionment is used.
"uick Check
How much totaI cost wiII be apportioned
from AMIN and BACS combined to the
Accounting epartment?
a. INR 35,250
b. INR 49,072
c. INR 18,000
d. INR 26,333
How much totaI cost wiII be apportioned
from AMIN and BACS combined to the
Accounting epartment?
a. INR 35,250
b. INR 49,072
c. INR 18,000
d. INR 26,333
"uick Check
How much total cost will be apportioned from ADMN
and BACS combined to the Accounting Department?
a. NR 35,250
b. NR 49,072
c. NR 18,000
d. NR 26,333
How much total cost will be apportioned from ADMN
and BACS combined to the Accounting Department?
a. NR 35,250
b. NR 49,072
c. NR 18,000
d. NR 26,333
Overhead
Appropriation
Few "uestions
4. SECONARY ISTRIBUTION SUMMARY
Cost of service
department
Basis of
apportionment
TotaI
Rs.
Production epartment
P1 P2 P3
primary distribution
Canteen
Power house (Iight)
Power house (power)
Stores
Time keeping &
accounts
Repair shop
---
No. of empIoyee
(6:5:4)
No. of Iight points
(3:4:5)
House Power
(3:2:3)
No. of requisitions
(4:3:5)
No. of empIoyee
(6:5:4)
VaIue of assets
(2:3:4)
63,000
1,500
1,200
4,000
3,600
3,000
4,500
20,000
600
300
1,500
1,200
1,200
1,000
18,000
500
400
1,000
900
1,000
1,500
25,000
400
500
1,500
1,500
800
2,000
AIIocated overhead TotaI 80,800 25,800 23,300 31,700
Items Basis TotaI
(Rs.)
Production epartment Service epartment
P
1
P
2
P
3
Office Workshop
Indirect wages
Indirect materiaIs
GeneraI overhead
Amenities to staff
EmpIoyer's
contribution to E.S.I.
Power
epreciation
Apportionment of
workshop overhead
Apportionment of
office overhead
ActuaI
ActuaI
irect wages
(4:5:6)
No.of empIoyees
(6:5:6:3:5)
irect Wages
(4:5:6)
H.P. of machine
X
Machine hours
worked
(6:16:15:1)
15% of vaIue of
machinery
Machine hours
(2:4:3)
irect wages
(4:5:6)
25,000
10,950
1,500
12,500
1,200
3,800
15,750
3,000
2,000
400
3,000
320
600
4,500
3,000
3,000
500
2,500
400
1,600
5,250
4,000
3,000
600
3,000
480
1,500
3,750
10,000
1,100
-
1,500
-
-
-
5,000
1,850
-
2,500
-
100
2,250
70,700 13,820
2,600
3,360
16,250
5,200
4,200
16,330
3,900
5,040
12,600
-
(-) 12,600
11,700
(-) 11,700
-
AIIocated overhead TotaI 19,780 25,650 25,270 - -
1. Overhead AnaIysis Sheet
2. OVERHEA ANALYSIS SHEET
Items
Basis TotaI
(Rs.)
Production eptt .(Rs)
Service eptt( Rs).
P
1
P
2
P
3
S
1
S
2
Rent and rates
GeneraI Iighting
Indirect wages
Power
epreciation
irect wages
Indirect materiaIs
Apportionment of
Service
epartments
Overhead
S
1
S
2
FIoor space
(4:5:6:4:1)
Light points
(2:3:4:2:1)
irect wages
(600:400:600:300:39)
H.P. of Machine
(6:5:5:1)
VaIue of machines
(12:16:20:1:1)
ActuaI
ActuaI
irect wages
(3:2:3)
Given
(2:3:5)
TotaI (A)
Working hours (B)
5,000
600
1,939
1,500
10,000
1,695
966
1,000
100
600
600
2,400
-
300
1,250
150
400
300
3,200
-
200
1,500
200
600
500
4,000
-
200
1,000
100
300
100
200
1,500
-
250
50
39
-
200
195
266
21,700 5,000
1,200
200
5,500
800
300
7,000
1,200
500
3,200
(-) 3,200
-
1,000
-
(-) 1,000
21,700 6,400
2,560
6,600
3,000
8,700
1,500
NiI NiI
Overhead rate per working hour [(A) (B)] 2.50 2.20 5.80
COST OF PROUCT - X
irect materiaI
irect Labour
Prime Cost
Factory Overhead :
P
1
: 4 x 2.50
P
2
: 5 x 2.20
P
3
: 3 x 5.80
Cost of Product X
10.00
11.00
17.40
50.00
30.00
80.00
38.40
118.40
( Rs)
3. SECONARY OVERHEA ISTRIBUTION SUMMARY
ParticuIars TotaI Rs.
Base Service epartments (Rs.) Production epartments
P " R S X Y Z
Factory
overhead
Add :
Service
ept.costs
P
"
R
S
5,95,000
0
0
0
0
Given
No. of
EmpIoyees
(50:40:50:
100:125:85)
LHs
Rs.80,000 in
(6:3:4:3:4)
Area
(Rs.1,33,000
in
(10:30:15:
15)
LHs
(Rs.66,000
in 4:3:4)
45,000
-45,000
75,000
5,000
-80,000
1,05,000
4,000
24,000
-1,33,000
30,000
5,000
12,000
19,000
-66,000
1,93,000
10,000
16,000
57,000
24,000
64,000
12,500
12,000
28,500
18,000
83,000
8,500
16,000
28,500
24,000
TotaI
OHEs of
prod.depts
5,95,000 3,00,000 1,35,000 1,60,000
5. OVERHEA ISTRIBUTION STATEMENT
ParticuIars of
Expenses
Basis of
Apportionment
TotaI Rs. Production eptts. Service eptts.
X Y A B
epreciation
Rent, Rates & Taxes
Power
Ins.on assets
Canteen exp.
EIectricity
irect wages
irect materiaI
Assets vaIue
(10:5:3:1)
FIoor space
(5:4:1:2)
H.P. of machine
(10:5:4:1)
Assets vaIue
(10:5:3:1)
No. of workers
(100:50:50:25)
Light points
(25:15;10:10)
ActuaI
ActuaI
38,000
18,000
12,500
9,500
5,400
3,600
8,000
4,000
20,000
7,500
6,250
5,000
2,400
1,500
---
---
10,000
6,000
3,125
2,500
1,200
900
---
---
6,000
1,500
2,500
1,500
1,200
600
5,000
4,000
2,000
3,000
625
500
600
600
3000
---
99,000 42,650
+11,150
23,725
+7,433
22,300
-22,300
10,325
+3,717
Re-distribution of expenses of eptt. A among X,
Y and B in ratio 3:2:1
Re-distribution of expenses of ept. B between
X and Y equaIIy
53,800
+7,021
31,158
+7,021
NiI
---
14,042
-14,042
AIIocated overhead 60,821 38,179 NiI NiI
7. STATEMENT SHOWING OVERHEA EXPENSES OF PROUCTION
EPARTMENTS A AN B
ParticuIars of
Expenses
Basis of
Apportionment
TotaI Rs. Production eptts. Service eptts.
A B C
irect materiaI
irect Iabour
epreciation
Rent,Rates & Tax
Insurance
Power
Canteen exp.
EIectricity
ActuaI
ActuaI
VaIue of Assets
(10:5:3:1)
FIoor space
(5:4:1:2)
VaIue of Assets
(10:5:3:1)
H.P. of machine
(10:5:4:1)
No. of workers
(100:50:50:25)
Light points
(25:15;10:10)
5,000
15,000
95,000
18,000
7,600
10,000
5,400
2,400
---
---
50,000
7,500
4,000
5,000
2,400
1,000
---
---
25,000
6,000
2,000
2,500
1,200
600
3,000
10,000
15,000
1,500
1,200
2,000
1,200
400
2,000
5,000
5,000
3,000
400
500
600
400
1,58,400 69,900 37,300 34,300 16,900
Re-distribution of expenses of service department
'C' Rs. 12,000 to and baIance of Rs. 22,300 to
A:B= 3:2
Re-distribution of expenses of service
epartment " to A:B = 9:1
+13,380 +8,920 (-) 34,300 +12,000
83,280
26,010
46,220
2,890
NiI
---
28,900
(-)28,900
AIIocated overhead totaI 1,09,290 49,110 NiI NiI
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