Overheads include cost of indirect material, indirect labour, indirect expenses which cannot be conveniently charged to any job. Direct expenses refers to expenses that are specifically incurred and charged for specific or particular Job, Process, services, cost unit or cost centre. Overheads by their nature cannot often be related to one particular cost centre. Apportionment is the division of costs among two or more cost centres in proportion to the estimated benefits received, using some logical basis.
Overheads include cost of indirect material, indirect labour, indirect expenses which cannot be conveniently charged to any job. Direct expenses refers to expenses that are specifically incurred and charged for specific or particular Job, Process, services, cost unit or cost centre. Overheads by their nature cannot often be related to one particular cost centre. Apportionment is the division of costs among two or more cost centres in proportion to the estimated benefits received, using some logical basis.
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Overheads include cost of indirect material, indirect labour, indirect expenses which cannot be conveniently charged to any job. Direct expenses refers to expenses that are specifically incurred and charged for specific or particular Job, Process, services, cost unit or cost centre. Overheads by their nature cannot often be related to one particular cost centre. Apportionment is the division of costs among two or more cost centres in proportion to the estimated benefits received, using some logical basis.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online from Scribd
Overheads are the indirect costs which cannot be
easily allocated to any specific Job, Process
because they are not capable of being identified with any specific Job or Process. Overheads include cost of indirect material, indirect labour, indirect expenses which cannot be conveniently charged to any job. Direct expenses refers to expenses that are specifically incurred and charged for specific or particular Job, Process, services, cost unit or cost centre. These expenses are also called as chargeable expenses. Classification and codification of overheads Classification: Codification: • Elementwise • Straight Numbering • Functionwise Method • Behaviourwise • Mnemoric Method • Decimal Method collection of overheads Primary and Secondary distribution of overheads using: • Allocation • Apportionment • Absorption Stores requisitions Wage sheets Cash book Purchase orders and invoices Journal entries Other Registers and Records Allocation is the process by which cost items are charged direct to a cost unit or cost centre. It is the process of charging the traceable amount of overhead to cost centre or cost unit. Overhead costs by their nature cannot often be related to one particular cost centre.
Apportionment is the division of costs among two
or more cost centres in proportion to the estimated benefits received, using some logical basis. Type of overhead Basis of apportionment
1. Rent and rates, heating, Area occupied(Floor space)
repairs, depreciation of buildings Number of light points, area 2. Lighting occupied
4. Power Horsepower of machines or
machine hours 6. Depreciation, insurance, Book value of asset or original repairs and maintenance of a cost plant and vehicle 7. Personnel, Staff Welfare Number of employees or wages paid Canteen, wages, Cost office 8. Stores No. of stores requisitions or value of material issued or value of material stored 11.Selling and Distribution Sales value 13.Advertisement Sales value