Allocation and Apportionment of Overheads
At some point an organisation may wish to know the total cost of a particular product or service. The records kept of direct costs, such as materials and labour, enable these costs to be identified with specific units. However, an organisation also incurs indirect expenses, such as rent and rates, light and heat, insurance and salaries of supervisors. Some method must be found to charge a fair share of these indirect expenses, known as overheads, to individual cost units to find the total cost of each unit.
KeywordsCost Unit Management Account Production Department Overhead Cost Elimination Method
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