Understanding Overhead Distribution in Cost and Management Accounting
Learn about the concept of overhead, the difference between allocation and apportionment of overhead, and how overhead costs are distributed to cost centers or units in cost and management accounting. Explore the primary and secondary distribution methods used to allocate indirect costs fairly and equitably across various cost centers. Gain insights into the importance of properly managing overhead costs in order to achieve accurate cost calculations and improve financial performance.
Download Presentation
Please find below an Image/Link to download the presentation.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author. If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.
You are allowed to download the files provided on this website for personal or commercial use, subject to the condition that they are used lawfully. All files are the property of their respective owners.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author.
E N D
Presentation Transcript
OVERHEAD DISTRIBUTION 20 MARKS COST AND MANAGEMENT ACCOUNTING-I SECTION : 2C Prof. Sunita Saha (SS)
OVERHEAD Concept of Overhead: Apart from the prime costs ( direct material, labour and overhead) other costs are also incurred such as indirect materials costs, indirect labor cots and indirect expenses. Such indirect costs are known as overhead. 1. The total of all indirect costs 2. The costs that cannot be identified with any particular product, job, contract or process. 3. The costs that are commonly incurred for a number of costs units or costs centers 4. These costs are apportioned to the related cost centers on some equitable and fair basis.
Difference between Allocation and Apportionment of Overhead to Cost centre or Cost Unit ALLOCATION Charging of overhead to a particular cost centre when such overheads have been incurred directly for cost centers. APPORTIONMENT Overhead identifiable with any particular production or service cost centre are distributed over the cost centre on a equitable basis. The total overhead incurred are to be apportioned to the various cost centers on suitable basis. 1. Primary Distribution 2. Secondary Distribution which are not directly Allocation is allotment of whole items of indirect costs to cost centre
