This approach is very famous approach to allocate and apportionate overhead up to 1950’s in India. traditional approach and modern approach (Activity Based Costing). In perspective of India two approach is famous to allocate and apportionate overhead viz. These department or product is called as cost center to which all cost is charged through allocation and apportionment. The process of allocation or apportionment of overhead to the department is called as departmentalization of overhead. The service department expenses have to be further apportioning to the department on some equitable basis depending up on the nature and extent of service rendered. According to ICMA Terminology “The allotment of whole item of cost to cost centers or cost unit is know as allocation.” The term apportionment is defined as allotment to two or more cost center or cost unit of a proportion of common item of cost on estimated basis of benefit received. The dictionary meaning of allocation is ‘To Place’ and dictionary meaning of apportionment is ‘To Share’. There is little difference between allocation and apportionment of overhead. Various approach are used for allocate and apportionate overhead to the department. All overhead expenses must have identification for department or product except in cases where this is not possible. cost does not directly attributable to any department. On the other hand overhead is an indirect cost i.e. Overhead is expenses incurred for carrying out the production process and sale of finished goods.
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