![]() ![]() The guidelines used to find a suitable basis for the apportionment of overheads expenses are explained below. Principles of Apportionment of Overhead Expenses ![]() These services include repairs and maintenance, purchasing, storeroom, training, and payroll. Instead, they provide auxiliary services to support the production departments. Service departments do not perform operations on products to be manufactured. For example, in a garment factory, production may be shared across the cutting, stitching, finishing, and packing departments. Production departments are directly engaged in manufacturing products. Departmentalization: A Procedure for Apportionment of Overhead Expensesįor the apportionment of overhead expenses, the departments of a factory are divided into two categories: production and service departments. This involves finding out a suitable basis of apportionment that enables the overhead item to be shared equitably across the cost centers. ![]() The principle is that if an overhead item cannot be fully allocated to one cost center, it should be apportioned over related cost centers. Such expenses are apportioned in a suitable ratio over several departments or shops.Īpportionment is the process of distributing overhead items to cost centers on a fair and reasonable basis. Apportionment of Overhead Expenses: DefinitionĬertain overhead expenses cannot be charged completely to a specific department or shop. Overhead costs are those expenses incurred in the course of running a business that cannot be connected to a specific product or service. ![]()
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