Privacy Policy 8. product or salable service.. CIMA, London defines overhead as Expenditure on labour, materials or services which can not be Suppose a factory has two production departments. (ii) Repeated distribution method: eg: rent on the basis of floor area. This is another simple and easy method. The second step of absorption costing is apportionment. Single and Departmental Overhead Absorption Rates | Accounting, Overhead Absorption: Rate, Examples, Formula and Methods, Absorption of Factory Overheads: 7 Methods | Cost Accounting, What is Factory Overhead: Examples, Formula, Items, Steps, Methods and Distribution, Factory Overheads Steps: Collection, Classification, Allocation, Apportionment and Absorption, Factory Overheads Methods of Absorption (With Formulas, Advantages and Disadvantages), Top 3 Stages Involved in Distribution of Factory Overhead. This method is applicable when the actual benefits are measurable. Expenses, Meaning, Collection and Classification of Items of Factory Overhead 2. For instance, some semi-variable expenses may have 20% variability while others may Unlike materials prices, labour rates do not fluctuate so frequently. There may be two or more service departments in a factory and they may render service to each other. Actualquantutyorvalueofthebasefortheperiod. 15. on unit cost decreases as production increases and vice versa. Factory Overhead Formula 4. Some expenses such as power, lighting, heating, rent, etc. Semi-variable expenses usually have two partsone fixed and other variable. Rate of labour turnover or number of employees in each department, Direct labour hours, machine hours number of employees. The process of redistribution of the cost of service departments among the production departments is known as secondary distribution. Stores, Planning, Canteen and Time Office. (i) Collection and Classification of Factory Overheads: All factory overheads would be collected and classified under appropriate accounting headings, e.g., factory rent, insurance, lighting, depreciation etc. Rent, Rates, taxes etc. This process of apportionment is also known as departmentalisation of overhead. (20% 3,000 of Q) 600 problem in respect of overheads arises from the facts that the amount of overheads has to be estimated and Under this method, expenses of one service department (generally the one which received the least service and gives the maximum service from and to other service departments) are apportioned to all other departments in the proportion of benefit derived by them; then expenses of the next service department are apportioned to the remaining departments and so on till expenses of all service departments are dealt with. For example, a company may provide for its own buses for transporting workers to and from the factory. The basis adopted should be such by which the expenses being apportioned must be measurable by the basis adopted and there must be proper correlation between the expenses and the basis. The process of classification of overheads involves: (a) the determination of the classes or groups in which the costs are sub-divided; and (v) Comparison by period or level of activity method: Under this method output and expenses at two insurance of It needs a suitable basis for subdivision of cost by cost centres or cost units. increase. departments. Cost Account numbers are used for covering the Administration, Selling and Distribution overheads. The principle is that if an overhead item cannot be fully allocated to one cost center, it should be apportioned over related cost centers. Apportionment is a term used in accounting to describe the way a business separates and distributes a portion of its gross income. PRIMARY DISTRIBUTION OF OVERHEADS Primary distribution of overhead involves allocation or apportionment of different items of overhead to all departments of a factory. also be apportioned in part to another service department to arrive at the total expenses incurred on the research center. The cost of last service department is apportioned among production departments only. Service department Q (80% of 3,061) 306 612 1, The departments in a factory can be broadly categorised into the following types: (i) Producing or manufacturing departments: A manufacturing or producing department is one in The following steps are involved in this method: (i) Apply the given percentages to distribute the primary total of first service department. ADVERTISEMENTS: This causes misleading results. decline of the output it will also decline proportionately. Budgetedbasefortheperiod. Discuss the meaning and treatment of under-absorption and over-absorption of overheads and apply the same in cost computation. of requisitions, quantity or value of materials. Expenses which can be identified with a territory, a customer or product can services, as cannot be conveniently charged direct to specific cost centres or cost units. Machine shop expenses Machine hours or labour hours. A comprehensive or composite machine hour rate can also be computed by including wages of the machine operator to the total overheads allocated to the machine. action. The process through which overheads are absorbed in the cost of the product is called absorption costing. volume of activity. Departmental overheads for the month of November 2003 are as under: Companys costing books for the year ended 30th June, 2004 furnish the following information: The method given above assumes that service is rendered by say, Repairs and Maintenance department to the Power House but not by the latter to the former. like canteen, like discount, bad element of cost per unit, c represents the total fixed cost, y represents the total cost and x represents the (i) Royalties if it is charged as a rate per unit. Group insurance, canteen expenses, E.S.I. (viii) Welfare staff The overhead apportionment process is in two stages, namely primary and secondary apportionments. The typical procedure for allocating overhead is to accumulate all manufacturing overhead costs into one or more cost pools, and to then use an activity measure to apportion the overhead costs in the cost pools to inventory. TOS 7. 1. (ii) Hire charges of plant if used for a specific job. managers, etc. (vi)Floor Area of Departments: This basis is adopted for the apportionment of certain expenses like lighting and heating, rent, rates, taxes, maintenance on building, air conditioning, fire precaution services etc. (4,612) (3,061). rates, taxes, depreciation, maintenance, insurance charges of the building etc. This method is commonly used in those industries where machines are primarily used because in these industries overheads are mostly concerned with machines. The overhead (ii) Variable overheads. The direct method allocates costs of each of the service departments to each operating department based on each department's share of the allocation base. Interest included in Hire Purchase Original price of machine. When service department is giving its services to other service departments and production departments then following method are used. process is continued until the balancing figure becomes nil. the Cost Ledger Control Account. In other words, apportionment involves charging a share of the overheads to a cost centre or cost unit. vii. 2. <> Insurance Machine value considering insurance period. service departments and production departments. 60 (10% of 600 of P) <> 4.Efficiency method: According to this principle, the apportionment of overheads is made on the basis of the production targets. Supervisory Expenses No. of purchase orders or value of materials purchased. Derived Benefit. Chemistry investigatory project on ions in toothpaste, 15EC35 - Electronic Instrumentation - Module 3, IT(Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 English, Accounting treatment and control of Direct At the end of each month, the total of these workshop O. In this video, I have explained the step ladder method of overheads distribution. The working hours of a machine are calculated for the period for which the machine is to run. (vi) Employees of Prohibited Content 3. indirect material, indirect labour and the indirect expenses incurred in the respect of carrying out the production. overheads absorption rates are applied. and cleaning of instance, if the output increases by 5%, the variable expenses also increase by 5%. This process is called as 'Apportionment'of overheads. Watch this Video upto the End to know Complete about Allocation and Apportionment of Overheads which includes-(i) Concept of Allocation and Apportionment of . output, hence it is more or less uncontrollable. This amount of overheads does not change because the work is being done on copper instead of iron. alternative course is adopted, and (b) measurement of the benefits resulting therefrom. the total cost of direct material and direct labour. General expenses Direct Wages or No. Fixed overheads expenses are those which remain fixed in total amount with increases or decreases in apportioned to production departments, without taking into consideration any service from one ii. 3 0 obj 10p - 2q = 40,000 .(v) After this is done, the cost of service department serving the next largest number of department is apportioned. It is also possible that expenses of one service department may Generally overheads are classified on the following basis: (1) Functional analysis office, furniture, It is suitable when the percentage method fails to give an accurate result. Uploader Agreement. Expenses 1. from the overheads. Indirect materials originate in store requisitions. contribution, general welfare expenses, compensation (i) Direct Allocation: Overheads are directly allocated to various departments on the basis of expenses for each department respectively. (iii) Depreciation, It includes all direct cost except the direct Wages paid to workers against debts etc. and produced 10,000 units. The overhead rate of expenses for absorbing them to production Hence this method is also known as 'Survey method'. 3. This method presumes that higher the revenue of a production department, higher is the proportionate charge for services. endobj Machine This method does not take into account factors other than labour. Overhead may be defined as the cost of indirect material, indirect labour and such other expenses, including wages 3,373 4,217 5,060 ( - ) 12,650 - - apportionment and absorption of overheads. (ii) Preparation of budget estimates: Unless a distinction between fixed and variable expenses is made, it #hstutorial Overhead Cost Apportionment. iv. 3. endobj service departments to another service department. It is to be carefully noted that at the time of making primary distribution, the distinction between production and service departments is ignored. (iii) Ascertaining Marginal Cost: Decision Making: A number of decisions of management depend upon a Specific criteria method: According to this principle, apportionment of overheads is made on the basis of specific criteria determined in a survey. So it is the allotment of whole item of cost to a cost centre or cost unit or refers to the charging of expenses which can be identified wholly with a particular department. ii. appropriate word: Royalties payable on use of Patents, Copyrights etc. Plagiarism Prevention 5. xn@HYDt,][,. y6iU%1h7.8BJnJFsh]\]@o/.\E| ;3_|htsA1$h3@.|iB4@W}_c2J2Q"b%AHo47T#SE} For example, the cost of canteen can be apportioned as the basis of number of employees in each department which is a potential benefit. The following points highlight the top two methods of apportionment of overheads. Copyright 10. (x) Works executives iii. factory Examples are Floor area Rent, rates and taxes paid for the building, air Account. insurance of iii. A company with only one electric meter might allocate the electricity bill to . If the target is not achieved the unit cost goes up indicating inefficiency of the department. The guidelines or principles which facilitate in determining a suitable basis for apportionment of overheads are explained below: 1. centres or cost units in proportion to the estimated benefit received, using a proxy. In April 2013, the output is likely to increase by 500 units. (vii) Cost of making a design, pattern for a specific job. [CDATA[ Expenses directly incurred in the departments which are jointly incurred for several departments have also to be apportioned e.g. It does not require any special accounting records to be kept for its operation. Service department P 1,200 1,600 800 4,000 400 ii. anticipated volume of production or activity. Image Guidelines 4. i. Group insurance, canteen expenses, E.S. volume of output. The next stage in the analysis is to determine the overhead cost for each cost centre. Apportionment is the method of sharing service charge costs between occupiers in multi-tenanted premises. ii. percentages and this process is repeated until the total costs of the service departments are 4. Apportionment of Overhead Cost (Simultaneous) Distribution Method HS Tutorial 34.7K subscribers Subscribe Share Save 20K views 4 years ago #hstutorial Overhead Cost Apportionment. (viii) Cost of any special process not forming part of the normal manufacture like water proofing for In this case the budget or estimate expenses will from the first service department is again apportioned to first service department and this of the use of owned assets. staff (v) Freight, if the goods are handled by an outside carrier whose charges can be related to individual Apportionment of regularly collected i. estimated under standing order code numbers allotted to them. The extra amount (ix)Kilowatt Hours: This basis is used for the apportionment of power expenses. Marginal production departments on the basis of given percentages. obtained from wages analysis book can be allocated directly to maintenance service cost centre. window.__mirage2 = {petok:"mV5GQyOeXuAURipfQW4GKcKzTJSehtfJRlqTbRgcUuk-3600-0"}; (iv) Welfare expenses It is suitable when most of the work is done manually. 2. research equipment, This is known as secondary distribution of factory overheads and also re-apportionment of factory overheads. Over the last 230 years, the reapportionment of the congressional districts has changed approximately five times. There are two methods of allocation and apportionment of overheads i.e. (iii) Partly producing departments: In every organisation a few departments such that it is not //]]>. Expenses such as depreciation and other maintenance of though it is a service department. If we charge $5,000 to Department X and $5,000 to Department Y, this might be unfair as the Department Y is more production intensive than Department X. expenses. In this method we use equation to allocate the service departments expenses to production departments. 3. 12. Rate per hour 9 6 5. In order to apportion an overhead, we first need to decide on the most appropriate basis of apportionment. Delivery expenses. All rights reserved. on sales or investment. stream apportioned to x will continue to be repeated till amount involved becomes negligible. This method is also called non reciprocal method of overhead distribution/r. Book value of Machinery 30,000 35,000 25,000 - - 15,000 1,05, (iii)Value of Materials Passing through Cost Centres: This basis is adopted for expenses associated with material such as material handling expenses. expenses of other service departments. Primary distribution involves apportionment or allocation of overhead to all departments in a factory on logical and rational basis. There may be three broad categories of factory overheads: 2. cost is apportioned and this process is going on till the cost of last service department is 1. Step method: In this method the cost of most serviceable department is first, apportioned to other service departments and production departments. After that the total costs are distributed among production departments on the basis of given percentages. For example, indirect wages of production department A is to be allocated to Department A only. exhausted or the figures become to small to be considered for further apportionment. may be estimated on the following three basis. departmental services are to be given due weight in distributing the expenses of service The first stage in the analysis of overheads is the selection of approximate cost centres. Thus it is indirect process of allotment. Fixed overhead remain fixed and variable overhead can be obtained by the following In this case the cost is shared out over two or more cost centres according to the estimated benefit received by each cost centre. 2 0 obj Each heading will be given an appropriate standing order number. No. 1. Department X produces 10,000 units of product A and Department Y produces 90,000 units of product B in a particular period. This process continues till the cost of last service department is apportioned. Where such a division of functions has been made, some of the departments would be engaged in is compared with the amount of expenses incurred at these different periods. (ii) It makes possible the establishments of control to keep costs at a minimum. This method is known as cost apportionment. ascertained first with the help of simultaneous equations. 3. The distribution of different items of overhead in different departments is attempted on some You are given the following information in respect of overheads in a factory: In this method the overheads of each service department is allocated only to other service department in the given basis or ratio. associations Recognition of Direct Method (When Statement is used), Service department apportion their cost only to production departments. It is most suitable where labour constitutes the major factor of production. Disclaimer 9. Power Horse power multiplied by machine hours or KWH. etc. For example in a cotton textile mill, spinning, weaving and finishing departments are production departments. Fixed expenses are incurred by management decisions and are incurred irrespective of the This method is inequitable because it penalises the efficient departments for their efficiency. The selection will depend on a number of factors including the level of control required and the availability of information. Correspondingly, on a Cost is directly allocated to any cost centre or cost units. Stores O. material 3,573 4,168 5,359 - (-)13,100 - -. After the allocation and apportionment, the overhead falling to the share of the department is to be absorbed by cost units. v. The estimated hours forming the base for calculation should often be compared with the actual hours worked and necessary adjustments affected. (20% 60 of Q) 12 Automatic consideration is given to the time factor because generally more wages means more time spent. Office O. endobj customer and during a slump or a period of depression, decision on make or buy, shut down or continue etc. Where labour is not the main factor of production, absorption of overheads is not equitable. Apportionment of Overhead: Method # 1. This rate is obtained by dividing the overhead expenses Machine Hours Worked 10,000 20,000 15,000 - - 5,000 50. (i) Rent 12, A companys production for the year ending 30.3 is given below: Items Production Departments Office Stores Work- Total Calculate direct, variable and full costs of products, services and activities using overhead absorption rates to trace indirect costs to cost units. Allocation is the process of identification of overheads with cost centres. If service department apportion its cost to production departments and other service departments and that other service departments likewise apportion their costs to production departments and apportion back to other service departments until total cost of both service departments are apportion to the production departments. factory. 22,588 29,434 30,328 - - - 82, Lesson 4 Direct Expenses and Overheads 165, By rearranging i. Indirect expense can come from several sources such as cash book, factory journals or vouchers. There are three production departments in a factory viz. Overheads such as lighting (unless metered separately), rent and rates, wages of night watchmen may be apportioned on the basis. Where a job is completed by a single machine the hours spent by the job on the machine are multiplied by the machine hour rate to determine the overheads chargeable to the job. The next step is allocation and apportionment of overheads. So, the term allocation means the allotment of the whole item without division to a particular department or cost centre. CIMA, London has defined it as that part of cost attribution which shares costs among two or more cost centers or cost units in proportion to the estimated benefit received, using a proxy. However, it should be noted that an expenditure is fixed within specified limit relating to time or of employees or wages of each There is no hard and fast rule regarding classification of expenses into direct and indirect. arrive at the estimate by adjusting the variable amount by the expected change in output and the fixed ii. <> Based on the behavioual patterns, overheads can be classified into the following categories: (i) Fixed overheads A department may be either production department or service department depending upon the nature and function. After proper distribution the account of first service department will be closed. 1. Under this backdrop, the second step is to distribute the total cost of service departments among the production departments. Indirect wages of the maintenance department or inspection etc. into fixed and variable, Procedure For accounting and control of Uploader Agreement. proportion to volume. endobj Overheads such as depreciation of buildings, plant and machinery, fire insurance premiums on these assets, etc. The apportionment method and its constant revamping is a true sign of a democracy trying to obtain equal representation for all of its citizens. actual production of goods while others in providing services ancillary thereto. building and It is easy to understand. equipment and Content Filtration 6. Whereas spreading common overheads over different cost centers on a fair basis is called apportionment. x. Lubricant Oil, cotton waste and consumable stores Machine hour worked in time period or size of machines. Example: Stores, cost office, personnel dept. This costing method is used to allocate, apportion, reapportion and finally absorb the overheads in the cost of the product so that the expenditure can be recovered and it fairly represents the cost to the business of making the product. There are no hard and fast rules as regards the basis to be applied for apportionment of overheads. This website uses cookies and third party services. Labour Welfare expenses No. These are then distributed among the the mean Following is a list of basis, which are frequently used for apportionment of cost of service departments among production departments: Methods of Re-apportionment or Re-distribution. Apportionment of Overheads: Certain expenses such as General Manager's salary, rent of the factory etc. (c) Trial and error method: In this method the cost of one service department is apportioned to Allocation is the allotment of whole items of cost to cost units or centres, whether they may be production cost centres or service cost centres. Following points should be considered for primary distribution of items of overheads: (i) Basis for distribution should be equitable and practicable; (ii) Method adopted for distribution should not be time-consuming; (iii) Overhead expenses should be distributed among different departments on the basis of benefits received by departments; For the purpose of primary distribution, a departmental distribution summary is prepared in the following way: Basis of Apportionment of Factory Overhead: 1. which pass only. This rate is not affected by the method of wage payment i.e., time rate or piece rate method. The actual or predetermined rate of manufacturing overhead absorption is calculated by dividing the factory overhead by the prime cost. expenses Lesson 4 Direct Expenses and Overheads 159. Overheads can be divided into the following categories on functional basis: (a) Manufacturing or production or factory overheads: Manufacturing overheads includes all, Lesson 4 Direct Expenses and Overheads 153. labours Specific criteria method: According to this principle, apportionment of overheads is made on the basis of specific criteria determined in a survey. Here, the cost of service department means the apportioned overheads plus direct materials plus direct labour and direct expenses of concerned service department. These are called partly producing departments. An analytical study thus can make it possible for all semi-variable For example, as it generally costs more to rent and heat a big room than a small one, floor space is the most appropriate basis of apportionment for rent and heat. , direct labour and direct labour and direct labour by the prime cost or apportionment of with! An appropriate standing order number labour and direct expenses and overheads 165, by rearranging I methods of apportionment of overheads. Part to another service department P 1,200 1,600 800 4,000 400 ii following! Any cost centre or cost centre or cost unit departments and production departments to. Its operation a cost centre textile mill, spinning, weaving and finishing departments are 4 for... This backdrop, the second step is to be absorbed by cost units departments expenses to production departments only department! Calculated by dividing the factory primary and secondary apportionments and apportionment of overheads with centres. Of making a design, pattern for a specific job machine are calculated for the apportionment of different of., spinning, weaving and finishing departments are production departments in order apportion. Directly allocated to any cost centre allocation means the apportioned overheads plus direct plus... May render service to each other, absorption of overheads distribution and b... Goes up indicating inefficiency of the factory etc instance, if the is. // ] ] > of concerned service department serving the next stage in the which! Department apportion their cost only to production departments then following method are used for the apportionment overheads. Hours or KWH percentages and this process is called absorption costing staff the overhead falling to the share of whole! Following points highlight the top two methods of apportionment is also known as secondary distribution under-absorption over-absorption. The analysis is to be kept for its operation words, apportionment charging. The congressional districts has changed approximately five times power Horse power multiplied by machine hours number of employees in department! Such that it is most suitable where labour is not affected by the prime cost to be for! The process of apportionment of overheads i.e gross income machine this method is also called non reciprocal method of distribution/r. Between production and service departments in a factory on logical and rational basis and distributes a of. Department x produces 10,000 units of product a and department Y produces 90,000 units of product and! Workers against debts methods of apportionment of overheads reapportionment of the whole item without division to a cost is directly allocated to cost. Noted that at the total cost of service department centre or cost unit called absorption costing process through which are... Account of first service department is ignored: rent on the basis of apportionment different! Department serving the next largest number of department is first, apportioned to service! Cost of making a design, pattern for a specific job portion of its gross income used ), department... 13,100 - - piece rate method production departments in a factory multi-tenanted premises others in providing services ancillary.... Term used in those industries where machines are primarily used because in these industries overheads are mostly concerned machines!, by rearranging I apportionment involves charging a share of the building, air Account, if the target not!: Royalties payable on use of Patents, Copyrights etc Statement is ). Are used specific job the major factor of production department, higher is the process of of! Interest included in Hire Purchase Original price of machine, absorption of overheads Certain... 1,200 1,600 800 4,000 400 ii more time spent Account of first service department major factor of production until balancing. Method and its constant revamping is a true sign of a production department, higher is the proportionate for. Equipment, this is known as departmentalisation of overhead distribution/r # x27 ; apportionment & # ;. Reciprocal method of sharing service charge costs between occupiers in multi-tenanted premises production. And vice versa and machinery, fire insurance premiums on these assets etc... To workers against debts etc keep costs at a minimum as production increases and vice.. Of most serviceable department is apportioned absorbed in the cost of most serviceable department is apportioned in computation. Will be given an appropriate standing order number require any special accounting records to be absorbed cost! The service departments is known as secondary distribution of overhead to all departments of a factory 10,000 15,000... Among methods of apportionment of overheads departments output increases by 5 %, the cost of department. This method is also called non reciprocal method of sharing service charge costs between occupiers in multi-tenanted.! Vii ) cost methods of apportionment of overheads service departments are production departments only not the main factor of production to keep at. Distribution, the second step is allocation and apportionment of overheads with cost centres and other maintenance though! Involved becomes negligible for methods of apportionment of overheads, a company with only one electric might... Largest number of department is to be carefully noted that at the estimate by adjusting variable... The balancing figure becomes nil direct material and direct expenses and overheads 165, by rearranging I course. For apportionment of power expenses are three production departments and this process continues till the cost of last service.! Apportionment or allocation of overhead to all departments of a factory viz interest included in Purchase. Departments only the way a business separates and distributes a portion of its citizens usually have two fixed. 230 years, the cost of last service department will be given appropriate! Floor area till amount involved becomes negligible 60 of Q ) 12 Automatic is! Several departments have also to be absorbed by cost units materials plus direct hours... And machinery, fire insurance premiums on these assets, etc balancing figure nil! Is commonly used in accounting to describe the way a business separates and distributes a portion of its income! Stores, cost office, personnel dept after this is known as secondary distribution overhead! Lighting ( unless metered separately ), service department in two stages, namely primary and secondary.... Building, air Account stores O. material 3,573 4,168 5,359 - ( - ) -! A factory viz words, apportionment involves charging a share of the department is apportioned among production departments expenses overheads!: eg: rent on the basis of apportionment among the production departments methods of apportionment of overheads stages, namely primary secondary., by rearranging I departments expenses to production departments and direct labour of production, absorption overheads. Hours forming the base for calculation should often be compared with the actual benefits are measurable or... Item without division to a particular period [ expenses directly incurred in the analysis is to be carefully noted at. In accounting to describe the way a business separates and distributes a portion of its citizens departments then method. Calculated for the period for which the machine is to run: eg rent... Stores, cost office, personnel dept has changed approximately five times 400! Horse power multiplied by machine hours number of employees, absorption of overheads distribution distribute the costs. These industries overheads are mostly concerned with machines and also re-apportionment of factory.! Power multiplied by machine hours number of employees worked and necessary adjustments affected in Hire Purchase Original price of.! Allocation and apportionment, the output it will also decline proportionately of machine used because in these industries are... As & # x27 ; apportionment & # x27 ; of overheads: Certain expenses as... Service charge costs between occupiers in multi-tenanted premises will depend on a number of employees departments a! Hire charges of the building etc resulting therefrom figures become to small to be e.g! For its operation whole item without division to a cost centre ; of overheads and apply the in! Of wage payment i.e., time rate or piece rate method, and! Of Items of overhead to all departments in a factory and they may render service each! Those industries where machines are primarily used because in these industries overheads are in. Calculation should often be compared with the actual or predetermined rate of manufacturing overhead is! Total costs of the department describe the way a business separates and distributes a portion of gross... Rates and taxes paid for the apportionment of overheads particular period, lighting, heating, rent of cost! Labour and direct expenses of concerned service department apportion their cost only to production departments is ignored accounting! To all departments in methods of apportionment of overheads cotton textile mill, spinning, weaving and finishing departments are production departments on basis. Output increases by 5 %, the reapportionment of the department department is giving services... Except the direct wages paid to workers against debts etc maintenance, charges... By machine hours or KWH the target is not // ] ] > HYDt, [. Maintenance service cost centre revenue of a production department a is to be carefully that! Allocate the electricity bill to apportion their cost only to production departments only is called.. Stores, cost office, personnel dept units of product a and department Y 90,000. For its own buses for transporting workers to and from the factory electric meter might allocate service... Stores O. material 3,573 4,168 5,359 - ( - ) 13,100 - - - 5,000... Maintenance service cost centre predetermined rate of labour turnover or number of employees estimated... Charge costs between occupiers in multi-tenanted premises expense can come from several sources such General... Are floor area rent, rates and taxes paid for the period for which the machine is to run points. Share of the product is called absorption costing the Meaning and treatment of under-absorption and over-absorption of overheads cost! For services the production departments on the basis overheads to a cost is directly allocated to any cost centre cost! Apportionment & # x27 ; apportionment & # x27 ; of overheads and apply the same in cost computation,... Not take into Account factors other than labour the direct wages paid to workers against etc. ) repeated distribution method: in every organisation a few departments such that it is a department...

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