Overhead - Primary and Secondary Distribution

Overheads

1. Cost accounting Overhead: Overhead expenses are all cost on indirect expenses , indirect labour and indirect material simply overheads means a total indirect cost. DISTRIBUTION OF OVERHEADS Now we can see about primary distribution method.

2. Primary distribution The overheads of service department are distribution directly to the production department in the given ratio based on apportionment is noting which direct estimated to the department.

3. Kumaresh ltd has three production department A ‘B ‘ C’ and two service departments ‘D’ and ‘E’ .the following figures are extracted from the records of the company. Rent and Rate 5000 Indirect wages 1500 Depreciation of machinery 10,000 General lighting 600 Power 1500 Sundries 10,000

4. Following further details are available Apportion the cost to various departments on the most equitable basic by preparing a primary departmental distribution summary. TOTAL A B C D E Floor space in square feet 10,000 2000 2500 3000 2000 500 Light points 60 10 15 20 10 5 Direct wages(RS) 10000 3000 2000 3000 1500 500 H.P of machines 150 60 30 50 10 - Value of machinery(RS) 2500000 60000 80000 100000 5000 5000

5. Item Basic of appostiment Product department Service department TOTAL A B C D E Rent & rate Floor space 5000 1000 1250 1500 1000 250 Indirect wages Direct wages 1500 450 300 450 225 75 Depreciation of machine Value of machinery 10000 2400 8000 4000 200 200 General lighting Light point 600 100 150 200 100 50 power HP of machinery 1500 600 300 500 100 sundry Direct wages 10000 3000 2000 3000 1500 500 Direct wages - 2000 - - - 1500 500 Total overheads 30600 7550 12000 9650 4625 1575

6. Explaination : Two different department there one is production department . In production department there are three department A,B and C, and other service department in that there are two department D and E. Basis of apportionment: Rent payed based on a floor space. Indirect wages can be approached based on direct wages. Depreciation of machinery depreciation is basically calculated value of assets. General lighting it can be divided as light point , floor area. In air problem light point is available so we can apporiate it. Power apportion for HP of machine. Sundries it can be apportion based on direct expense. After totaling all department separately now we can check it by cross adding.

7. RESULT: After incurring all expenses organize at want to find actual expenses incurred for each department sepeateles . we hope you can understand this concept

8. Thank you submitted by g.Janani t.sowndharya