OVERHEADS

Click to edit Master subtitle style

ROHIT SANKHE P-29 SACHIN GOLAMWAR P-31 SUSHANT NADARGE P-41 JYOTI RAJAVAT P-51 SUHAS TOMPE P-55 SONAL MACHALE P-56
4/25/12

Introduction

4/25/12

Classification of overheads

Based On Function Factory OHS Office & Administration Selling & distribution

Based On Behavior

Fixed Overheads Variable Overheads

4/25/12

Cont

Based On Elements Indirect Materials Indirect labour

Based on Control

Controllable Overheads Uncontrollable Overheads

4/25/12

WHAT IS ABSORPTION

Costs apart from the prime cost are collectively called overheads. Absorption of Factory Overhead Absorption of Factory Overhead
4/25/12

Under

Over

REASONS OF UNDER / OVER-ABSORPTION OF OVERHEADS

Wrong estimation of overhead expenses Wrong estimation of work done Error in using method of absorption Seasonal fluctuation in overhead or over utilisation of capacity
4/25/12

Under

Wrong estimation of output

Under Absorption Of Factory Overheads

DAT PARTICULA J/F AMOUN DAT PARTICULA J/F AMOUN E RS T E RS T 1 To SLCA 200000 1 By WIP A/c. 400000 A/c. 2 WLCA A/c. 145000 By Costing 10000 P/L A/c. 3 GLA A/c. 65000 410000

410000

4/25/12

Over Absorption Of Factory Overheads

DATE PARTICULA J/F AMOUN DATE PARTICULA J/F AMOUN RS T RS T 1 To SLCA 200000 1 By WIP 450000 A/c. A/C. 2 To WLCA 145000 A/c. 3 To GLA 65000 A/c. 4 To Costing 40000 P/L A/c. 450000
4/25/12

450000

Rates of Absorption of Overheads

Factory Overheads
Direct

Wages

Office/Administrative Overheads
Works

Cost and Distribution Overheads 4/25/12

Selling

Bases for Absorption of Factory/Works/Manufacturin g Overheads

Direct Direct

Wages Rate Material Rate Rate

Prime-Cost Unit

Rate Hour Rate Hour Rate

Labour

Machine

4/25/12

TREATMENT OF UNDER OR OVER-ABSORPTION OF OVERHEADS

3 Methods: Writing off to costing profit and loss account Use of supplementary rate Carry forward to the next year
4/25/12

SELLING & DISTRIBUTION OVERHEADS

Methods

As a rate per article As a % of selling price of each article As a % of works cost

4/25/12

Accounting treatment
as

per as accounting entries are concerned, to the selling & distribution account, all the selling & distribution overhead incurred are debited. Similarly, debit is given to cost of sales account & credit is given to the selling & distribution overhead account, for recovery of such overhead.

4/25/12

ADMINISTRATION OVERHEAD

4/25/12