ACCOUNTING FOR OVERHEADS. BY- Dr. Kamlesh Khosla M.com, M.A.(Eco.), PH.D PG Diploma in PMIR & PG Diploma in Journalism and Mass Communication . INTRODUCTION.
ACCOUNTING FOR OVERHEADS
BY- Dr. Kamlesh Khosla
M.com, M.A.(Eco.), PH.D
PG Diploma in PMIR &
PG Diploma in Journalism and Mass Communication
Accounting of Overheads is one of the most important & technical aspect of Cost accounting. From Cost reduction & Cost control point of view, overhead play a great role. So, proper understanding of computation and accounting of overhead is must for Students of commerce.
Example- Indirect Material Cost
Indirect Labour Cost
Step 1 -> Classification of Overheads
Step 2 -> Collection of Overheads
Step 3 -> Allocation of Overheads
Step 4 -> Apportionment of Overheads
Step 5 -> Re-apportionment of service department overheads
Step 6 -> Absorption of Overheads
Sources -> Material Requisitions
-> Wages analysis Book
-> Cost Journal
-> Subsidiary Records
PRINCIPLES FOR APPORTIONMENT OF OVERHEADS
It means the apportionment of overheads of service departments among the production departments on some suitable basis.
Overhead Absorption Rate =
Total overheads of cost centre/ Total Quantum of base
Factory Overhead Rate = Amount of Production overheads/ Direct Cost Material x 100
Factory Overhead Rate = Amount Of Production Overheads/ Direct Labour Cost x 100
Factory Overhead Rate = Amount Of Production Overheads/ Prime Cost x 100
Factory Overhead Rate = Amount Of Production Overheads/ Direct Labour Hours
Factory Overhead Rate = Amount of Production Overheads/ Machine Hours
Factory Overhead Rate = Amount Of Production Overheads/ No. of Units of Production
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