4. Indirect Costs
Depreciation, Rent, Rates, Heating and Lighting (not separately metered), Canteen costs, Supervision etc
– are APPORTIONED to Cost Centres on a suitable basis.
Cost Apportionment
overhead costs are shared out among various Cost Centres on some fair and equitable basis since the overhead cannot be directly allocated to any one particular cost … The basis for allocation of overheads is just and fair to all parties involved. Material cost has been apportioned on the basis of cost ratio per unit multiplied by the units produced i.e., A : B = 1 x GOO : 2 x 800 = 600 :1,600 = 3:8. Solution: 5. Uploaded By Chrollo; Pages 42; Ratings 94% (80) 75 out of 80 people found this document helpful. 2,500 was considered to be fixed cost. This preview shows page 35 - 38 out of 42 pages. A factory has two production departments: preparation and assembly, and one canteen for the labour force. Apportionment: Cutting Sanding Assembly Stores Canteen . Cutting Sanding Assembly Stores Canteen . In the reverse cost method or net realizable value method, the net profit achievable from the sale of joint products is used to apportion the collective cost by determining the cost in reverse order, i.e., deducting estimated gains and subsequent costs from the sales value. The power expenses might be allocated in proportion to the consumption of power by the different departments or divisions. Canteen must be apportioned on the basis of number of requisitions . General lighting expenses are to be apportioned on the basis of floor area. The base used should be appropriate for the overhead cost to ensure that the cost is fairly apportioned … The lack of accuracy does not justify the present cost and perceived intrusion of a new census before each biennial election. The assignment of points is arbitrarily by management with the help of departmental heads and technical advisers. This therefore resulted in difference in opinion by even accountants on the basis of apportioning costs. In other words, the joint costs are apportioned on the basis of their ability to absorb joint costs. 9,300; of this Rs. During the month of May costs for generating power amounted to Rs. Overheads 10 000 12 000 24 000 3000 6000 . Suppose that three cost centres have floor space of 50,000 square meters; Production cost centre (A) has 10,000 square meters, Production cost centre (B) has 15,000 square meters and Service cost centre (C) has 25,000 square meters. No of personnel 20 10 30 5 5 No of Requisitions 15 5 10 2 7. Direct wages have similarly been apportioned i.e., A : B = 2 x 600 : 3 x 800 = 1,200 : 2,400 = 1: 2. Costs are apportioned on the basis of percentage or points value assigned to the products according to their relative importance. 2. Answer option: A. Upvote (2) Downvote (0) Reply (0) Answer added by George Karaparambil, Manager, MIS Operations , Kerala Ayurveda Ltd, KATRA GROUP 5 years ago . Accounting costs are apportioned on the basis of the number of reports. Apportioned to Assembly department = 1,000/4,000 x $15,000= $3,750 (W3) Direct labour is not an overhead and is therefore not part of the overhead allocation and apportionment process. Note: There are certain expenses which cannot be apportioned or allocated among the different departments on a suitable basis, the same should be transferred to General Profit and Loss Account (e.g., Interest on Capital, Debenture Interest, Loss on sale … Standard Cost Method: Under this method, the joint cost is apportioned on the basis of standard cost set for the respective … At the next level the costs allocated to the general overhead cost center are apportioned between the manufacturing and finishing departments on a suitable basis. Service Department ‘X’ renders service to A, B and Y in the ratio 13:6:1, while Service Department ‘Y’ renders service to A and B in the ratio 31:3. Test Prep. The payroll costs for the year were $100,000, and the accounting costs for the year totaled $50,000. @ Rs.20 per kg. 3. and B 400 kgs. This ability is measured by sales value or selling price. Such expenses are power, fuel, repair, maintenance and depreciation. No basis required for allocation. The payroll costs for the year were $231,000 and the accounting costs for the year totaled $75,500. Note 3 On the last reapportionment, D’s overheads are apportioned on the basis of 75/95 to A and 20/95 to B. The reciprocal service to C is ignored as, by now, it is not material. Calculate the MHR from the following: Cost of the machine Rs 8,000 Cost of installation Rs 2,000 Scrap value after 10 years Rs 2,000 Rates and rent for a quarter for the shop Rs 300 General … Statistics about the departments are: Fixed overhead costs are: rent $45,000, insurance $5,400, canteen costs $12,000, electricity $40,000 . Cost apportionment is the allotment of proportions of cost to cost centers or cost units. The distribution of such overhead to several departments or cost centers proportionately on some equitable basis is known as apportionment of overheads. The basis for apportionment may be out of date. The apportionment base is usually a quantity such as the floor area of a department, book value of machinery, number of employees, machine hours used, or kilowatt hours of electricity used. All overhead expenses are grouped together under common heads and are further classified according to their fundamental differences. it need be apportioned on the basis of Sales Value of each department. Accounting costs are apportioned on the basis of the number of reports. For example, salary paid to the general manager should be distributed to the production, administration and selling departments as the general manager looks after all the departments. How to use on the basis of in a sentence. Example 1. Cost allocation and cost absorption is the portioning of a cost among a set of cost objectives. Algebraic approach. Classification of Overheads is the process of grouping of indirect costs on the basis of common characteristics and clear objectives. 2. Cost Allocation Example . Number of workers or employees : All employees related costs like canteen, supervision, personnel, medical and welfare expenses. Note 2 It doesn’t really matter which of the two remaining cost centres you start with. Once a leaseholder has established the apportionment method which should be they can make their own calculations to check that this method has been applied correctly. The overhead cost of the canteen is to be re-apportioned to the production cost centres on the basis of the number of employees in each production cost centre. For example, in the United States, apportionment follows the decennial census. (a) Due to complexity of cost items, it is not always possible to use a particular basis of apportioning costs to the various cost centre or department. Apportionment is done in case of those overhead items which cannot be wholly allocated to a particular department. Hence, sometimes the choice of a suitable basis is a matter of judgment and common sense. Total cost: Marginal cost Rs.6,000 and Fixed cost Rs.5,000. School of Energy Power and Mechanical Engineering,North China Electric Power University, Baoding 071003, China; 2. Canteen costs apportioned on the basis of the number of people employed. Upvote (1) Downvote (0) Reply (0) Answer added by Muhammad Sabith, Accountant , … Equity or Fairness. For example: Power expenses. De très nombreux exemples de phrases traduites contenant "costs may be apportioned" – Dictionnaire français-anglais et moteur de recherche de traductions françaises. Allocation allots whole amount of cost to cost centre or cost unit where as apportionment allots part of cost to cost centre or cost unit. Store overheads have been apportioned as a percentage of material cost, i.e., Rs19,800/RS 1,98,000 x 100 = 10% . For this purpose, the cost object could be production units, machines, groups of machines, individual products or groups of products. Sales: A 200 kgs. Accounting costs are apportioned on the basis of the number of reports. Show how the costs would be apportioned to each department. Basis for Comparison Cost Allocation Cost Apportionment; Meaning: Allocation of cost, implies the entire distribution of the overhead item to the departments on a logical basis. Apportionment of cost refers to distribution of various overhead items, in proportion, to the department on a logical basis. Companies that price all or a large part of their output on a cost-plus basis certainly need to include overheads in their cost of production. Rental costs are usually apportioned between cost centres on the basis of the floor space taken up by each centre. Checking whether your Landlord has correctly Apportioned Service Charge costs. If a cost is incurred for two or more divisions or departments then it is to be apportioned to the different departments on the basis of benefit received by them. First Apportionment (based on 65 staff) 923 462 1385 (3000) 230 . Study of heat-power cost apportionment method on the basis of coefficient of external bonds: LI Huijun 1 , LI Feiyu 2 , JIANG Changhui 1: 1. The justification for this method is that the joint products should generate enough revenues to cover all costs plus a reasonable return. @ Rs.40 per kg. The total of all these expenses is divided by the total machine hours. 3. Accounting costs are apportioned on the basis of the number of reports. De très nombreux exemples de phrases traduites contenant "apportioned rate" – Dictionnaire français-anglais et moteur de recherche de traductions françaises. Finally, the allocated and apportioned costs of the manufacturing and finishing departments are absorbed and added to the costs of the production units. The payroll costs for the year were $100,000, and the accounting costs for the year totaled $50,000. Guodian Langfang Thermal Power Co., Ltd., Langfang 065000, China Basis of Apportionment to Cost Centers: Floor area occupied: Building related expenses like rent and rates, cleaning, heating and lightning, repairs, depreciation and insurance of buildings. 5. A cost apportionment base is the basis used by a business to apportion its overhead costs. Bad debts are apportioned based on Sales of each department. (W4) Electricity is apportioned to all departments on the basis of kW hours. Note 1 E’s costs are apportioned directly as no reciprocal service is involved. The states conducted the 2010 elections with districts apportioned according to the 2000 Census. On the basis of definition is - according to : based on. 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