INSTITUTE OF TECHNOLOGY & MANAGEMENT MR. VIJAY BALU RASKAR BATCH-SMBA-02 17-01-2011
MY GROUP MEMEBRS Presents• Ms Shruti Kannan = Introduction of CR• Ms Pramada Dhanawade = Factors of CR• Ms Kusum Rawat = Scope, Tool & Technique of CR• Mr Newymathews = Intoduction of Material & Inventory valuation
OVERHEAD Overheads comprise of indirectmaterials, indirect employee costs and indirect expenses which are not directly identifiable or allocable to acost object in an economically feasible way.
COSTS Direct Cost Indirect Cost• It is part of project / firm. • Extra part of project/firm• Capable of separating • Non-project related cost project-related costs (direct (Not included in the project cost) from non-project- cost) related costs (indirect cost). • Vacation, sick, general• Salary & Wages to workers office time, etc. (indirect labor), along with benefits,• Project taxes, heat, light, rent and material, consultants etc other non-project-specific• Related to project work. expenses
EXAMPLE of CostsA unit manufactures two products-Leather Shoes & Leather wallets.Material used for both the products istraceable to them individually butexpenditure of common machine isnot traceable.Therefore, Material would be directcost and ‘Machine Expenses’ wouldbe indirect cost.
Production Overheads:- All the costincurred for production of Goods areknown as production overheads.Administration Overhead:- Indirectexpenses incurred for running theadministration are known asAdministration Overhead.
Selling overheads:- Overhead incurredGetting order from customers is calledas selling overheads.Distribution Overhead:- Overheadincurred for execution of order is calledas distribution overhead.
Variable overheads:- It comprise ofexpenses which vary in proportion tothe change of volume of production. For example, cost of utilities etc. Fixed overheads:- It comprise ofexpenses whose value do not change with the change in volume ofproduction such as salaries, rent etc.
Semi-variable overheads:- They are partly affected by change in theproduction volume. They are furthersegregated into variable overheads and fixed overheads.
ALLOCATE AND APPORTIONMENTwe collect all overhead, and then we classify it.
1st Step : Collection of DifferentOverhead ExpensesAll overhead expenses cannot becollected from one source.1) Store:- Keeps all raw material anduse it as per requirements.2) Wages analysis book:- All indirectlabor cost.3) Invoices of other indirectexpenses:- Cash book and otherexpenses.
2nd Step : Departmentalization of overheadThere may be repair department,power department, tool departmentand many more.
3rd Step : Allocation andApportionment of overhead expenses a) Allocation of overhead expenses Expense for particular department Like overtime salary.
b) Apportionment of overhead expenses Rent for plant for two different departments.Let A plant using 70% area then 70% rent from total.Let B plant using 30% area then 30% rent from total.
RESULT:- Cost reduction increasesproductivity and reducing cost perunit. Material is the prime part ofthe total cost of production ofmanufacturing firm. Overhead plays very importantrole in accounting. They are chargingeach unit of a product with anequitable share of overhead expenses.