Amity Business School Amity School of Business BBA, III SEMESTER COST AND MANAGEMENT ACCOUNTING Ms. Soumya Pandey.

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 prepared by those organisations  that manufacture goods.  they prepare another account called  the manufacturing account  in addition to the trading,

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Amity Business School Amity School of Business BBA, III SEMESTER COST AND MANAGEMENT ACCOUNTING Ms. Soumya Pandey

OVERHEAD ALLOCATION & ABSORPTION Module 3 OVERHEAD ALLOCATION & ABSORPTION

OVERHEADS According to CIMA, London “Overhead is an aggregate of indirect material, indirect wages and indirect expenses”. These are the cost that have to be incurred although, they have no directly measurable relationship to specific units, production or cost objectives.

Stages In overhead distribution Classification of Overheads Departmentalization of overheads through allocation and apportionment Absorption of overheads

Classification of Overheads Classification is concerned with the arrangement of items in logical groups having regards to their nature or purpose. Overheads are divided into- Factory overheads Office and Administration Overheads Selling and Distribution Overheads

Departmentalization of Overheads Departmentalization refers to the allocation and apportionment of overheads among various departments. Allocation of overheads: There are certain overheads which can be directly estimated for different departments. Eg- Wages paid to indirect labour, depreciation etc, such should be directly charged to the department, in which it is incurred.

Apportionment of overheads