01.Understand the concept of ‘Overheads’.
02.Understand classification, allocation, apportionment and absorption of overheads.
03. Understand the Primary and Secondary Distribution of Overheads.
04. Understand the Traditional & Activity Based Costing methods
05. Identify the value added & non value added activity
01.Understand the concept of ‘Overheads’.
02.Understand classification, allocation, apportionment and absorption of overheads.
03. Understand the Primary and Secondary Distribution of Overheads.
04. Understand the Traditional & Activity Based Costing methods
05. Identify the value added & non value added activity
This presentation covers Accounting of Services and Operations like - Cinema Hall, Canteen, Hospital, Transport, Costing etc.
an important part in MBA Financce
This power point presentation related to process costing. which is useful to students who studying B.com, BBA,M.COM MBA etc.
It involves short notes on definition of process costing,its features,applications,difference between process costing and job costing, advantages and disadvantageous of process costing, procedure of process costing,format of process account, process losses and abnormal gain.
A power point presentation describing some basic definitions, father of cost accounting, Indian aspect of cost accounting and Various Methods and Techniques of costing.
Presented by: Aquib Ali, Ajay Gupta and Ashwin Showi. (M.Com students)
at the Bhopal School of Social Sciences(BSSS) on 6 September, 2017
1.Distinguish between the direct and indirect labor cost
2. Understand the various facets of labor cost control
3. Understand the concepts like labor turnover, time keeping, time booking and idle and overtime
4. Know the various methods of remuneration including incentive plans
5. Understand the pay roll accounting and disbursement of wages.
Cost Accounting-
-Meaning of Cost Accounting
-Scope of Cost Accounting
-Nature of Cost Accounting
-Relationship b/w Financial Accounting & Cost Accounting
-Cost Accounting v/s Management Accounting
-Objectives of cost accounting
-Function of cost accountant
-Essentials of cost accounting
-Advantages of cost accounting
-Limitations of cost accounting
-Role of cost in cost accounting
-Cost Unit & Cost Centre
-Cost Techniques
-Costing Systems
-Costing Methods
-Cost Classification
-Components of total cost
-Cost Sheet.
Marginal costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
Activity based costing is considered to be useful only for Manufacturing Organizations whereas reality is that it is equally usefull to Service providers
1.1 identify the type of accounting
1.2 difference between Cost Accounting , Cost Accountancy and Costing
1.3 understand the Management information needs
1.4 identify the objectives of cost accounting
1.5 difference between Cost Accounting Vs. Financial Accounting
1.6 identify the role of cost accountant
Elements of Cost: Classification of Cost:element wise classification :function wise classification :behavior wise classification: Managerial decision making classification
The procedure for accounting and control of overheads involves the some steps described as follow:
Most of the manufacturing process functionally are different and performed by different departments in a factory. Where such a division of functions has been made, some of the departments would be engaged in actual production of goods while others in providing services ancillary thereto.
This presentation covers Accounting of Services and Operations like - Cinema Hall, Canteen, Hospital, Transport, Costing etc.
an important part in MBA Financce
This power point presentation related to process costing. which is useful to students who studying B.com, BBA,M.COM MBA etc.
It involves short notes on definition of process costing,its features,applications,difference between process costing and job costing, advantages and disadvantageous of process costing, procedure of process costing,format of process account, process losses and abnormal gain.
A power point presentation describing some basic definitions, father of cost accounting, Indian aspect of cost accounting and Various Methods and Techniques of costing.
Presented by: Aquib Ali, Ajay Gupta and Ashwin Showi. (M.Com students)
at the Bhopal School of Social Sciences(BSSS) on 6 September, 2017
1.Distinguish between the direct and indirect labor cost
2. Understand the various facets of labor cost control
3. Understand the concepts like labor turnover, time keeping, time booking and idle and overtime
4. Know the various methods of remuneration including incentive plans
5. Understand the pay roll accounting and disbursement of wages.
Cost Accounting-
-Meaning of Cost Accounting
-Scope of Cost Accounting
-Nature of Cost Accounting
-Relationship b/w Financial Accounting & Cost Accounting
-Cost Accounting v/s Management Accounting
-Objectives of cost accounting
-Function of cost accountant
-Essentials of cost accounting
-Advantages of cost accounting
-Limitations of cost accounting
-Role of cost in cost accounting
-Cost Unit & Cost Centre
-Cost Techniques
-Costing Systems
-Costing Methods
-Cost Classification
-Components of total cost
-Cost Sheet.
Marginal costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
Activity based costing is considered to be useful only for Manufacturing Organizations whereas reality is that it is equally usefull to Service providers
1.1 identify the type of accounting
1.2 difference between Cost Accounting , Cost Accountancy and Costing
1.3 understand the Management information needs
1.4 identify the objectives of cost accounting
1.5 difference between Cost Accounting Vs. Financial Accounting
1.6 identify the role of cost accountant
Elements of Cost: Classification of Cost:element wise classification :function wise classification :behavior wise classification: Managerial decision making classification
The procedure for accounting and control of overheads involves the some steps described as follow:
Most of the manufacturing process functionally are different and performed by different departments in a factory. Where such a division of functions has been made, some of the departments would be engaged in actual production of goods while others in providing services ancillary thereto.
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
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what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
how can I sell my pi coins for cash in a pi APPDOT TECH
You can't sell your pi coins in the pi network app. because it is not listed yet on any exchange.
The only way you can sell is by trading your pi coins with an investor (a person looking forward to hold massive amounts of pi coins before mainnet launch) .
You don't need to meet the investor directly all the trades are done with a pi vendor/merchant (a person that buys the pi coins from miners and resell it to investors)
I Will leave The telegram contact of my personal pi vendor, if you are finding a legitimate one.
@Pi_vendor_247
#pi network
#pi coins
#money
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
how to sell pi coins at high rate quickly.DOT TECH
Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
Resume
• Real GDP growth slowed down due to problems with access to electricity caused by the destruction of manoeuvrable electricity generation by Russian drones and missiles.
• Exports and imports continued growing due to better logistics through the Ukrainian sea corridor and road. Polish farmers and drivers stopped blocking borders at the end of April.
• In April, both the Tax and Customs Services over-executed the revenue plan. Moreover, the NBU transferred twice the planned profit to the budget.
• The European side approved the Ukraine Plan, which the government adopted to determine indicators for the Ukraine Facility. That approval will allow Ukraine to receive a EUR 1.9 bn loan from the EU in May. At the same time, the EU provided Ukraine with a EUR 1.5 bn loan in April, as the government fulfilled five indicators under the Ukraine Plan.
• The USA has finally approved an aid package for Ukraine, which includes USD 7.8 bn of budget support; however, the conditions and timing of the assistance are still unknown.
• As in March, annual consumer inflation amounted to 3.2% yoy in April.
• At the April monetary policy meeting, the NBU again reduced the key policy rate from 14.5% to 13.5% per annum.
• Over the past four weeks, the hryvnia exchange rate has stabilized in the UAH 39-40 per USD range.
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
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#vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore#blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #blackmagicforlove #blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #Amilbabainuk #amilbabainspain #amilbabaindubai #Amilbabainnorway #amilbabainkrachi #amilbabainlahore #amilbabaingujranwalan #amilbabainislamabad
Latino Buying Power - May 2024 Presentation for Latino CaucusDanay Escanaverino
Unlock the potential of Latino Buying Power with this in-depth SlideShare presentation. Explore how the Latino consumer market is transforming the American economy, driven by their significant buying power, entrepreneurial contributions, and growing influence across various sectors.
**Key Sections Covered:**
1. **Economic Impact:** Understand the profound economic impact of Latino consumers on the U.S. economy. Discover how their increasing purchasing power is fueling growth in key industries and contributing to national economic prosperity.
2. **Buying Power:** Dive into detailed analyses of Latino buying power, including its growth trends, key drivers, and projections for the future. Learn how this influential group’s spending habits are shaping market dynamics and creating opportunities for businesses.
3. **Entrepreneurial Contributions:** Explore the entrepreneurial spirit within the Latino community. Examine how Latino-owned businesses are thriving and contributing to job creation, innovation, and economic diversification.
4. **Workforce Statistics:** Gain insights into the role of Latino workers in the American labor market. Review statistics on employment rates, occupational distribution, and the economic contributions of Latino professionals across various industries.
5. **Media Consumption:** Understand the media consumption habits of Latino audiences. Discover their preferences for digital platforms, television, radio, and social media. Learn how these consumption patterns are influencing advertising strategies and media content.
6. **Education:** Examine the educational achievements and challenges within the Latino community. Review statistics on enrollment, graduation rates, and fields of study. Understand the implications of education on economic mobility and workforce readiness.
7. **Home Ownership:** Explore trends in Latino home ownership. Understand the factors driving home buying decisions, the challenges faced by Latino homeowners, and the impact of home ownership on community stability and economic growth.
This SlideShare provides valuable insights for marketers, business owners, policymakers, and anyone interested in the economic influence of the Latino community. By understanding the various facets of Latino buying power, you can effectively engage with this dynamic and growing market segment.
Equip yourself with the knowledge to leverage Latino buying power, tap into their entrepreneurial spirit, and connect with their unique cultural and consumer preferences. Drive your business success by embracing the economic potential of Latino consumers.
**Keywords:** Latino buying power, economic impact, entrepreneurial contributions, workforce statistics, media consumption, education, home ownership, Latino market, Hispanic buying power, Latino purchasing power.
Webinar Exploring DORA for Fintechs - Simont Braun
Overheads
1. Dr. Mohamed Kutty Kakkakunnan
Associate Professor
P.G. Dept. of Commerce
NAM COLLEGE KALLIKKANDY
Kannur – Kerala - India
2. OVERHEADS /OVERHEAD COSTS
• Costs or expenses incurred over and above the
prime cost
• Sum total of indirect material, indirect labor and
other indirect expenses
• Any cost which is not directly attributable to a cost
centre or cost unit
• “The aggregate of indirect material cost, indirect
labor cost and indirect expenses” ICMA
• Since benefits of such expenses cannot be
attached to a particular cost centre /cost unit, such
expenses cannot directly allocated
• Are apportioned on equitable base
• Also known as burden, on cost
3. Steps in Overhead Accounting
Overheads cannot be directly charged, but are
apportioned equitable on some base.
Stages or steps involved in the allocation of
overheads to different cost centers -
1. Classification of overheads
2. Codification and collection of overheads
3. Allocation and apportionment of overheads
(departmentalization of overheads)
4. Re-apportionment of overheads
5. Absorption of overheads
4. Classification of Overheads
• Process of grouping
• Divided into groups and sub groups
Bases for Classification
I. Function or Functional classification
II. Elements or Element-wise classification
III. Nature or Behavior or Behavioral
classification
IV. Controllability
5. I. Function or functional classification
a. Factory or manufacturing overheads
b. Office or administration overheads
c. Selling overheads
d. Distribution overheads
e. Research and development overheads
II. Elements or element-wise classification
a. Indirect material
b. Indirect labor
c. Indirect expense
6. III. Nature or behavior or behavioral
classification
a. Variable
b. Fixed
c. Semi-variable or semi-fixed
IV. Controllability
a. Controllable
b. Non-controllable
7. 2. Codification and Collection of Overheads
• For easy identification, dealing and accounting the
overheads, the classified overheads are given different
codes
• Is the process of allotting number or symbols to each
group or sub groups of overheads for easy
identification
FURTHER, Expenses are incurred at different periods for
different purposes, by different persons responsible
These scattered expenses are to be collected under
suitable headings – known as collection
Can be collected form various vouchers and documents
such as (a) invoice, (b) cash book (c) subsidiary records,
journals etc
8. 3. Allocation and apportionment of expenses
(departmentalization)
• For ease of management and administration, an
organization will be divided into different units or
divisions, known as departments
• Three types of departments
i. Production department : Engaged in the conversion
of raw material into finished products
ii. Service department: Auxiliary departments, not
directly engaged in the production; but helps the
production departments by rendering services
required. Eg Office, Personnel department etc
iii. Partly producing departments
9. A. Allocation of Overheads
• The process of identification of overheads with cost
centers
• An expense which is directly identifiable is with a
specific cost centre is allocated to that cost centre
• “is the allotment of whole item of cost to a cost centre
or cost unit” or
• “charging of expenses which can be identified wholly
with a particular department”
Eg:- 1. Overtime wages paid to workers in the production
dept., can be fully allocated to the production
department.
2. Repair charges for a particular machinery used in a
particular department
10. B. Apportionment of Overheads
Certain costs or expenses are commonly incurred to
different departments, thus, cannot be identified with
a particular cost centre or department
Costs which cannot be identified with a particular cost
centre or department need be divided or apportioned
among the beneficiary departments equitably
Apportionment - the allotment of expenses which
cannot be identified wholly with a particular
department
“As the allotment to two or more cost centers of
proportions of the common items of cost on the
estimated basis of benefit received.
Eg: Rent, rates, taxes, works manager’s salary etc
11. Differences Between Allocation and Apportionment
Allocation Apportionment
Means the allotment of whole
item of cost to cost centers or cost
units
Means allotments of proportion
of items of cost to cost centre or
cost units
Deals with whole item of cost Deals with only proportions of
items of cost
Cost is directly allocated to
cost centre or cost unit
Not directly allocated, but are
divided or apportioned to different
departments on suitable basis
Allocated when the cost centre
uses whole of the benefits of the
expense
Apportioned when cost centers
use only a proportion of the
benefits of the whole expenses
No bases are required for
allocation
Need a suitable base
12. BASES OF APPORTIONMENT
Allotment?
Whole item of cost
Apportionment?
Allotment of proportions of items
THUS, Apportionment need proper (equitable)
base for allotment of overhead expenses to
different departments and service department
costs to production departments
Allotment and apportionment of overhead
expenses to different departments including
service department is known as PRIMARY
DISTRIBUTION
13. Bases for apportionment (contd.)
1. Direct Allocation
Directly allocated to different departments on the
basis of expenses incurred, if identifiable
eg:- Overtime wages paid to the workers in a
particular dept.
Repair charges incurred for a machine used in a
particular dept.
2. Direct Labor / Machine Hours
Apportioned on the basis (ratio) of direct labor /
machine hours
Majority of general overhead items are
apportioned on this basis
14. 3. Value of Material Used
Eg: material handling expenses
4. Direct Wages
Overheads which are incurred on the basis of
labor costs
5. Number of Workers
Overheads varies on the basis of number of
workers (canteen expenses, , medical
expenses, time keeping, supervisions etc)
6. Floor Area
rent, rates, taxes, maintenance on building etc
15. Bases of apportionment contd.
7. Capital values
repairs, maintenance, insurance, taxes et
8. Light Points
9. Kilowatt hours
10. Technical estimates
16. Eg:- Modern Ltd., has four departments – three production
depts namely, X, Y and Z and one service dept. called A.
Actual costs of the firm for the year are as follows:-
Costs Rs. Costs Rs.
Rent 1000 Supervision 1500
Repairs to plant 600 Fire insurance (stock) 500
Depreciation (plant) 450 Power 900
Employer’s Liability for insurance 150
Lighting 120
17. Following information is available
X Y Z A
Area (sq.mts) 1500 1100 900 500
Number of employees 20 15 10 5
Total wages (Rs.) 6000 4000 3000 2000
Value of plant (Rs.) 24000 18000 12000 6000
Value of stock (Rs.) 15000 9000 6000 -
Horse power of plant 24 18 12 2
Apportion the costs to the various depts., on the most
equitable base
18. OVERHEAD DISTRIBUTION SUMMARY
item
Bases of
apportionment
TOTAL
Production Departments
Service
Dept.
X Y Z A
Rent Floor area 1000 375 275 225 125
Repairs to
plant
Plant value
600 240 180 120 60
Depreciation Plant value 450 180 135 90 45
Light Floor area 120 45 33 27 15
Power Horse power 900 360 270 180 90
Supervision No. of
employees 1500 600 450 300 150
Fire insurance Stock value 500 250 150 100 -
Employer’
liability to
No of
employees 150 60 45 30 15
Total 5220 2110 1538 1072 500
19. RE-APPORTIONMENT OF SERVICE DEPARTMENT
COSTS TO PRODUCTION DEPARTMENTS
Three types of departments
Actual production goes on in production
department, service department help the
production departments by rendering services
required.
Thus, service department costs are to be re-
apportioned to production depts.
The process of re-apportionment of service
department costs to production departments is
known as Secondary Distribution
20. SERVICE DEPARTMENTS BASIS OF APPORTIONMENT
Maintenance Hours worked
Payroll – time keeping Total labor or machine hours
or number of employees
Employment – personnel Labor turnover rate or
number of employees
Store keeping Number of requisitions or
value of materials
Purchase Number of orders or value of
materials
Welfare, ambulance, canteen,
recreation
Number of employees
Building service area
21. SERVICE DEPARTMENT BASIS OF APPORTIONMENT
Internal transport or
overhead crane services
Weight, value of product
handled, weight and
distance travelled
Transport Crane hours, truck hours,
weights, distance, number
of packages
Power house – electric
power
Wattage, horse power,
machine hours , number of
electric points
Power house Floor area, cubic content
22. Methods of re-apportionment (re-distribution)
Methods of
secondary
distribution
Direct
Step down
Reciprocal
services
Repeated
distribution
Trial and error
Simultaneous
equation
method
23. Repeated Distribution Method
Under this method, the totals of each department (both
production and service) is shown separately in the first
row of the table
Then, one service department cost is taken and is
distributed to other departments (including service
departments) in the given ratio
Then the next service department cost (total cost as per
primary distribution + cost received as per the second
step above) is taken and is distributed to other
departments (including service department)
This process is repeated till the entire cost of the service
department is exhausted
24. SECONDARY DISTRIBUTION SUMMARY
P1 P2 P3 S1 S2
As per Primary
distribution
800 700 500 234 300
Service Dept. S1 47 94 70 (234) 23
Service Dept. S2 129 65 65 64 (323)
Service Dept. S1 14 25 19 (64) 6
Service Dept. S2 2 2 2 - (6)
Total 992 886 656
25. Trial and Error Method
In this method, as a first stage, service dept
costs are taken and apportioned as is done in
the case of repeated distribution method
Then, all the positive figures in the column are
added to ascertain the total cost of each
service department
These totals are then distributed to production
departments in the given percentage or ratio
26. SECONDARY DISTRIBUTION (Trial and Error Method)
S1 S2
Cost as per Primary distribution 234 300
Service Dept. cost S1 (10%) (234) 23
Service Dept. cost S2 (20%) 65 (323)
Service Dept. cost S1 (10%) (64) 7
Service Dept. cost S2 (20%) 1 (6)
Total 300 330
Production Department P1 (800 + 20% of S1 total + 40% of S2
total) = 992
Production Department P2 (700 + 40% of S1 total + 20% of S2
total) = 886
Production Department P3 (500 + 30% of S1 total + 20% of S2
total) = 656
27. ABSORPTION OF OVERHEAD
Next step in overhead accounting
Means – distribution of overhead expenses allotted
to a particular department over the units
produced in that department
“ is the process of absorbing all overhead costs
allocated or apportioned over particular cost
centre or production department”
Apportionment of overhead expenses of cost
centers to cost units
Also known as recovery of overheads from the cost
of production
28. Steps in Absorption of Overheads
Two steps
1. Computation of overhead rates and
2. Applying overhead rates to cost units
Computation of overhead rates
What is rate? How to calculate rate?
Overhead rate is the rate obtained by
dividing overhead costs by the base.
The base can be the direct material cost,
direct wages, prime cost, labor hours,
machine hours etc
29. Applying overhead rates to cost units
To calculate cost of each unit produced the
overhead rate is multiplied with the units of the
base contained in each individual product, job or
process.
(Overhead Rate X Units of base in the product)
Eg:-
Total overhead cost of Production dept X for June is
Rs. 1,50,000 and total labor hours during the
month is 25,000. If product A produced in X
requires 100 hours – calculate the amount of
overhead to be charged to Product A
30. Two steps
1. Determination of rate
1. Application of rate (determination / charging
of overhead cost to the product)
Overhead rate X Units of base in the product
Rs. 6 x 100 hours = Rs. 600
31. Different Types of Overhead Rates
1. Actual rate
The rate obtained by dividing actual overheads with actual
quantity or value of the base
2. Predetermined (Budgeted)Overhead rate
The rate obtained by dividing predetermined or budgeted
overhead expenses by the budgeted base of the period
32. 3. Blanket or Single rate
When a single overhead rate is calculated for
the factory as a whole, it is known as Blanket
or single rate- suitable
4. Multiple rates:
when different overhead rates are calculated
for each production department, service dept.
cost centers, product line, fixed overheads,
variable overheads etc. it is known as multiple
rates
33. 5. Normal overhead rates
Refers to the overhead rates calculated with reference to
normal capacity
6. Supplementary Rates
When pre-determined rates are used for absorption of
overhead, there can be difference between actual overhead
cost and overhead absorbed. To adjust this difference
supplementary rates are used
34. Methods of Absorption of Overheads
1. Direct material cost method
2. Direct labor cost (wages) method
3. Prime cost method
4. Direct labor (production) hour method
5. Machine hour rate