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

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Presentation on theme: "Amity Business School Amity School of Business BBA, III SEMESTER COST AND MANAGEMENT ACCOUNTING Ms. Soumya Pandey."— Presentation transcript:

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

2 OVERHEAD ALLOCATION & ABSORPTION
Module 3 OVERHEAD ALLOCATION & ABSORPTION

3 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.

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

5 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

6 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.

7 Apportionment of overheads

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