State any five items of overhead and the basis on which each is usually apportioned among departments. What principles guide the choice of a basis?

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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. The table lists five common items and their generally accepted bases.

| Overhead item | Usual basis of apportionment |
|---|---|
| Factory rent, rates, lighting, heating | Floor area occupied by each department |
| Depreciation and insurance of machinery | Value (capital cost) of machinery in each department |
| Supervision, canteen, welfare, ESI/PF | Number of workers in each department |
| Power / fuel for machines | Horsepower of machines, or HP × machine hours |
| Stores service / material handling | Value or weight of material issued to each department |

(Other common pairs: indirect wages on direct wages; separate lighting on number of light points.)

**Principles guiding the choice of a basis:**
1. **Benefit received** — apportion in proportion to the benefit each department draws from the expense (rent on floor area, since a bigger department uses more of the building).
2. **Ability / potential to receive service** — where benefit cannot be measured directly, use a measure of the capacity to benefit, such as capital value for the insurance of assets.
3. **Cause of the cost** — apportion on the factor that actually causes the cost (number of workers for canteen expenses, since more workers means a bigger canteen bill). …

Q.State any five items of overhead and the basis on which each is usually apportioned among departments. What principles guide the choice of a basis?

Concept understanding — Allocation and Apportionment of Overheads

Overhead item	Usual basis of apportionment
Factory rent, rates, lighting, heating	Floor area occupied by each department
Depreciation and insurance of machinery	Value (capital cost) of machinery in each department
Supervision, canteen, welfare, ESI/PF	Number of workers in each department
Power / fuel for machines	Horsepower of machines, or HP × machine hours
Stores service / material handling	Value or weight of material issued to each department

Q.State any five items of overhead and the basis on which each is usually apportioned among departments. What principles guide the choice of a basis?

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