The chapter discusses cost elements of overhead including indirect materials, indirect labor, and indirect expenses. It provides examples of each overhead cost element. The document also includes an example problem involving distributing overhead costs to production departments using different methods and calculating the cost to produce 10,000 units under each method.

1. Cost accounting chapter 4
Chapter 4
• COST ELEMENTS OVER HEAD
• LEARNING OBJECTIVES
• After studying this chapter, you should be able to do the following:
• 1. Identify the Indirect material
• 2. Describe Indirect labor
• 3. Explain the Indirect expense

2. Cost accounting chapter 4
Indirect Material
* 1. Material which
cannot be applied as a
direct charge
* 2. Supplies
* 3. Scrap or waste
material
* 4. Small perishable
tools and dies

3. Cost accounting chapter 4
Indirect or Non-Productive Labor
I. (a) Lost time and
idle time of productive
workers (b) Time of
helpers, sweepers,
truckers .
2. Supervisors
and foremen
3.
Superintendenc
e
4. Inspection (when
not considered as a
direct labor charge)
5. Factory
clerks
6. Employees
on defective
work
7. Employees on
experimental work

4. Cost accounting chapter 4
Indirect Expenses
*1. Rent
*2. Insurance —
fire and liability
*3. Taxes
*4. Interest
*5. Power
*6. Light
*7.
Heat
*8. Freight and
cartage inward
*9. Over, short, and
damage
*10. Miscellaneous
factory expenses
*11. Depreciation
*12. Maintenance,
repairs, and renewals

5. Cost accounting chapter 4
• EX.
• The following data from Mariem manufacture at march 31-03-2023
Data
Production sectors Services sectors
TOTAL
MANU. ASSEM. SHAP. STORES H.R
Ind.raw material 100,000 60,000 40,000 30,000 20,000 250,000
Ind. salaries 200,000 120,000 80,000 60,000 40,000 500,000
Equipment 100,000 300,000 200,000 …. …. 600,000
No. of workers 50 20 10 10 10 100
Area m² 150 100 100 75 75 500
No. of operating hours 10,000 8,000 6,000 …. …. 24,000
No. of lamps 500 200 100 100 100 1,000
Exchange documents 250 150 100 … …. 500

6. Cost accounting chapter 4
• Additional information :
• Rent $5,000 ,
• Light $3,000 ,
• Insurance of equipment $90,000 ,
• Depreciation 10% .
• Request :
• Prepare A ) distribution table of overhead
B ) Distribute the cost of services centers to Manufacturing centers
• According
1 ) Aggregate method “ IN EQUALL “
2 ) unilateral method “
3 ) Descending method” stores services 3 sectors and H.R services 4
sectors “ .
C ) Calculate the carrying factor according hours of operating
D ) Calculate the cost of produce “ 10,000 unit “ if each unit use $20 direct
raw material & $10 direct labor and 5 hours in manufacturing sector ,3
hours in assembly sector and 2 hours in shaping sector .

7. Cost accounting chapter 4
Cost distribution table
Indirect cost Distrebuition Total Production sectors Services sectors
base MANU. ASSEM. SHAP. STORES H.R
Ind.raw material Direct 250,000 100,000 60,000 40,000 30,000 20,000
Ind. salaries Direct 500,000 200,000 120,000 80,000 60,000 40,000
Rent Area 5,000 1,500 1,000 1,000 750 750
Light No. of lamps 3,000 1,500 600 300 300 300
Insurance Equipment Equipment 90,000 15,000 45,000 30,000 0 0
Depreciation 10% 60,000 10,000 30,000 20,000 0 0
Total 908,000 328,000 256,600 171,300 91,050 61,050
Rent = (5,000/500)= 10 X { 150 , 100 , 100 , 75 , 75 }
Light = ( 3,000 / 1,000 ) = 3 X { 500 , 200 , 100 , 100 , 100 }
Insurance of equipment = ( 90,000 / 600,000 ) = .15 X { 100,000 , 300,000 , 200,000 }
Depreciation = 10% X { 100,000 , 200,000 , 300,000 }

8. Cost accounting chapter 4
Distribute the cost of service centers to production centers
Indirect cost Distrebuition Total Production sectors Services sectors
base MANU. ASSEM. SHAP. STORES H.R
Aggregate method
TABLE 1 908,000 328,000 256,600 171,300 91,050 61,050
91,050+61,050 In equal 152,100 50,700 50,700 50,700 91,050 61,050
Total 378,700 307,300 222,000
Unilateral method
TABLE 1 908,000 328,000 256,600 171,300 91,050 61,050
Stores 91,050 Ex.doc 45,525 27,315 18,210 91,050
H.R 61,050 No.workers 38,156 15,263 7,631 61,050
Total 908,000 411,681 299,178 197,141 0 0

9. Cost accounting chapter 4
Distribute the cost of service centers to production centers
Indirect cost Distribution Total Production sectors Services sectors
base MANU. ASSEM. SHAP. STORES H.R
Descending method
TABLE 1 908,000 328,000 256,600 171,300 91,050 61,050
H.R sevices 4 sectors No.workers 33,917 13,567 6,783 6,783 61,050
Stores services 3 sector Ex.doc 49,417 29,650 19,76697,,833
908,000 411,334 299,817 197,849 0 0

10. Cost accounting chapter 4
Carrying Factor
C ) Calculate the carrying factor according hours of operating
D ) Calculate the cost of produce “ 10,000 unit “ if each unit use $20 direct
raw material & $10 direct labor and 5 hours in manufacturing sector ,3 hours
in assembly sector and 2 hours in shaping sector .

11. Cost accounting chapter 4
Calculate cost to produce 10,000 unit
Aggregate method Production sectors
MANU. ASSEM. SHAP.
Total cost 378,700 307,300 222,000
Op. Hours
10,000 8,000 6,000
Carrying factor =
37.9 38.4 37.0
cost to produce 10,000 5 3 2
units "O.H cost " 189.4 115.2 74.0
Cost of OP.TO 10,000 U 10,000 10,000 10,000
1894000 1152000 740000
R.M 10,000X20 + Labor 10,000X10 = 300,000
Total cost = 300,000 + 1894000+ 1152000 +740000 = 2,934,000

12. Cost accounting chapter 4
Calculate cost to produce 10,000 unit
Unilateral method Production sectors
MANU. ASSEM. SHAP.
411,681 299,178 197,141
Op. Hours 10,000 8,000 6,000
Carrying factor
41 37 33
cost to produce
10,000 5 3 2
units "O.H cost " 206 112 66
Cost of OP.TO 10,000
U 10,000 10,000 10,000
2,058,405
1,121,91
8 657,137
R.M 10,000X20 + Labor 10,000X10 = 300,000
Total cost = 300,000 + 2,058,405 +1,121,918 + 657,137 =4,137,459

13. Cost accounting chapter 4
Calculate cost to produce 10,000 unit
Descending method Production sectors
MANU. ASSEM. SHAP.
411,334 299,817 197,849
Op. Hours 10,000 8,000 6,000
Carrying factor
41 37 33
cost to produce 10,000 5 3 2
units "O.H cost " 206 112 66
Cost of OP.TO 10,000 U 10,000 10,000 10,000
2056670 1124314 659497
R.M 10,000X20 + Labor 10,000X10 = 300,000
Total cost = 300,000 + 2,05,667+1,124,314+659,497 =4,140,480