Overhead - Dani Ki Costing - CA IPCC Video Lectures
Overhead - Dani Ki Costing - CA IPCC Video Lectures | Overhead - Dani Ki Costing - CA IPCC Video Lectures | Overhead - Dani Ki Costing - CA IPCC Video Lectures | Overhead - Dani Ki Costing - CA IPCC Video Lectures | Overhead - Dani Ki Costing - CA IPCC Video Lectures | Overhead - Dani Ki Costing - CA IPCC Video Lectures
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Overhead Costing
The most complicated costing procedure is to calculate and apportion
the cost of overheads. Overheads are the cost incurred to carry out work for
output. The expenses incurred for providing ancillary services, or for the
service which are of no use in themselves but adds utility to the main activity
are termed as overheads. The examples of overheads are heating and lighting
expenses for the factory, machinery service expenses, etc.
There are different kinds of overheads viz. Factory or Manufacturing
Overheads, Office and Administrative Overheads, Selling and Distribution
Overheads, etc. Such overheads are defined on the basis of their function.
While the overheads defined on the basis of their nature are fixed overheads,
variable overheads and semi – variable overheads. They are also classified on
the basis of elements such as Indirect Material, Indirect labor and Indirect
Expenses. The main classification required for decision making is controllable
cost and uncontrollable cost.
Classification of overheads facilitates controlling the expenses,
preparing budgets and decision making. Distribution of overheads is a procedure
and it is done step wise in the manner by starting it with estimation and
collection of manufacturing overheads and then overheads are allocated to
different departments and then the same are apportioned. The further process
involves re-apportionment of overheads.
The apportionment is made by following the suitable method from
different methods available such as direct re-distribution method, step method
of secondary distribution or non-reciprocal method and reciprocal service
method. Different methods are also available for absorption of overheads. These
methods are percentage of direct materials, percentage of direct cost,
percentage of direct labor cost, labor hour rate and many others are used.
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