Accounting for Overhead

 

What are overheads?

Accounting theory of accounting for overhead for the board exam.

 

 

Classify overhead cost according to function.

CLASSIFY ACCORDING TO FUNCTION

Factory, production or work cost

Factory expenses include indirect materials, indirect labour and indirect expenses.

These are incurred inside factory where production is carried-on.

Some factory expenses are factory rent, rates and taxes, power, fuel, water, factory wages, salary etc.

 

Administrative or office expenses

Administrative and office overhead includes office  rent, rates and taxes, office lighting and power, office wages, salary, pension, provident fund etc.

Selling and distribution expenses

These expenses are necessary for sales promotion.

They are advertisement, free sample and charity of goods, carriage outward, packing cases, fuel, grease, lubricants for delivery vans, wages of packers, van driver and dispatch clerks etc.

 

In five to seven sentences write the meaning of fixed overheads.

Give the meaning of fixed overhead with appropriate example.

Define fixed overhead with suitable example.

FIXED COST

It is also called capacity cost, periodic cost and burden cost.

These expenses are not changed according to output.

This level is pre fixed. It is never be zero.

Generally, it is uncontrollable and unavoidable cost.

Some fixed costs are rent, depreciation, salary for permanent staff, insurance etc.

 

What do you understand by variable overhead? State any two features of it.

VARIABLE COST

It is also called changeable cost marginal cost, direct cost and running cost.

It is affected according to output or production.

There is close relationship between total variable cost and volume of output.

When output is zero then total variable cost is also zero but variable cost per unit never is zero.

Some variable expenses are indirect materials, indirect labour, fuel and power, commission to salesman, overtime expenses etc.

 

 

Define semi-variable cost with suitable examples.

SEMI-VARIABLE COST OR SEMI-FIXED COST

It is the mixed of fixed cost and variable cost.

Neither total amount nor cost per unit of semi variable cost remains constant.

If level of production increase, total semi-variable cost decrease and vice versa.

It is never be zero.

Some semi-variable expenses are telephone and postpaid mobile bill, electricity charge, water supply etc.

 

Classify overhead cost according to control.

CONTROLLABLE COST & UNCONTROLLABLE COST

Controllable cost

These costs can be controlled by management.

It can be changes or alter by action but time should be long.

If there is short time, it is difficult to control. Generally, these are variable cost in nature.

Some controllable costs are direct materials, direct labour, direct overhead etc.

 

Uncontrollable cost

There are some kinds of cost that cannot be controlled by management.

It cannot be changed or altered.

Generally, these are fixed cost in nature.

Some uncontrollable costs are rent, salary to permanent staff, annual insurance, management salary etc.

###########

Click on link for YouTube videos

SHARE (ACCOUNTING FOR SHARE) http://tiny.cc/889jkz

SHARE IN Nepali http://tiny.cc/k99jkz

DEBENTURES http://tiny.cc/yeakkz

FINAL ACCOUNT: CLASS 12  http://tiny.cc/e89jkz

FINAL ACCOUNT IN NEPALI http://tiny.cc/w89jkz

WORK SHEET http://tiny.cc/579jkz

RATIO ANALYSIS (ACCOUNTING RATIO) http://tiny.cc/4fakkz

FUND FLOW STATEMENT http://tiny.cc/wiakkz

CASH FLOW STATEMENT http://tiny.cc/8gakkz

THEORY ACCOUNTING XII http://tiny.cc/nfakkz

THEORY: COST ACCOUNTING http://tiny.cc/tfakkz

COST ACCOUNTING http://tiny.cc/p29jkz

LIFO−FIFO http://tiny.cc/dgakkz

COST SHEET, UNIT COSTING http://tiny.cc/w49jkz

COST RECONCILIATION STATEMENT http://tiny.cc/829jkz

###########

Write some points of difference between allocation and apportionment overheads.

Differences between Allocation & Apportionment

Bases	Allocation	Apportionment
Direct or indirect	Allocation is a direct process.	Apportionment is an indirect process.
Basis	Some of allocations are directly allocated.	Apportionment needs a suitable basis for sub-division of overhead.
Whole or part	Allocation deals with whole item of overhead.	Apportionment deals with the proportion of item of cost.
Limit	Allocation is wider and accurate than apportionment.	Apportionment is less accurate than allocation.
Staring and end	Allocation ends with a cost center.	The process of apportionment is carried further down.

 

*******

Thank you for your investing time.

You can help me by sharing this article at your social media platform.

Jay Google, Jay YouTube, Jay Social Media

[जय गूगल, जय युट्युब, जय सोशल मीडिया]