Q.State the most appropriate basis of apportionment for each of the following Overhead items:

Each Overhead item is apportioned on the basis that most closely reflects why, or how much, a department actually causes or benefits from that cost.

Each basis is chosen because it most closely reflects the reason the department incurs, or benefits from, that particular cost:

1. Factory Rent and Rates relates to the space a department occupies within the factory building → apportioned on Floor Area.
2. Canteen and Welfare Expenses exist for the benefit of the people working in each department, not the machines or space they use → apportioned on Number of Employees.
3. Power consumed by machines (when not separately metered per department) is driven by how much machine capacity each department runs → apportioned on Horse Power (or kWh) of the machines installed in each department.
4. Depreciation of Machinery is a charge on the machinery asset itself losing value over time, so it should track the RELATIVE VALUE of machinery each department holds → apportioned on Value of Machinery (or, where more appropriate, Machine Hours run). …

A frequent error is apportioning Power on Floor Area (confusing it with rent-type items) instead of Horse Power/kWh, or apportioning Canteen Expenses on Floor Area instead of Number of Employees — always match the basis t …