Ch 4Overheads — Class 12 Cost Accounting, concept-first.

Every cost a factory incurs falls into one of two broad groups. Some costs can be traced conveniently and wholly to a particular job, product or unit — the timber that goes into one specific table, th…

Because overhead is such a large and varied group of costs, it is classified in several different ways, each useful for a different purpose — controlling costs, fixing prices, or preparing cost sheets…

A factory of any size incurs hundreds of separate items of overhead every month. Referring to each of them by a long descriptive name — 'depreciation of grinding machine in the machine shop' — would b…

Before overhead can be shared among departments and products, it must first be collected — that is, all the indirect costs of a period must be gathered together and accumulated under their proper code…

Once overhead has been collected, the next task is to charge it to the departments or cost centres where it belongs — this is called departmentalization of overhead.

When an item of overhead is common to several departments, the amount charged to each department can only be as fair as the basis on which it is split.

After the primary distribution, the service departments (stores, maintenance, power house, canteen) each carry a total of overhead.

After secondary distribution, the whole of the factory overhead sits in the production departments. The final step is to charge this overhead to the actual products (cost units) that pass through each…

The machine hour rate (MHR) is the overhead absorption rate expressed as the cost of running a machine for one hour.

Overhead is usually charged to products not at the actual rate (which is known only after the period ends) but at a predetermined (estimated) overhead rate fixed at the start of the period, so that pr…

Sample papers and previous-year board questions for this subject.