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Concept Of Allocation Of Overhead And Apportionment Of Overheads

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Allocation Of Overheads
Overheads are common costs incurred for the benefits of a number of costs centers or cost units. Therefore, they can not be identified and allocated directly to a particular unit of output. As such, they are to be allocated among the units of output of a particular department or a number of departments or cost centers.

Allocation of overheads is the process of charging overhead costs to a particular department or cost center. It is the allotment or assignment of an overhead cost to a particular cost unit. If the overhead cost is associated with a single department or cost center, the whole amount is charged or distributed among the units of output of that particular department. For example, the whole amount of repair and maintenance expenses for a machine is charged or allocated to that department where the machine has been installed.

Apportionment Of Overheads
Distribution of an overhead cost to several departments or cost centers is known as apportionment of overheads. It is the process of charging or apportioning costs to a number of cost centers or cost units. If a given cost is common to two or more departments or cost centers, such cost should be apportioned or divided among these departments on an equitable basis. For example, the amount of factory rent should be apportioned to all the departments. Similarly, the amount of remuneration of the general manager should be distributed to the production, administration and marketing departments as the general manager is associated with all these departments.

Related Topics
Meaning And Classification Of Overheads
Concept About The Absorption Of Overheads

12 comments:

  1. this is not enough for my assignment..... please elaborate it.

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  2. Allocation of overhead means charging of identified overhead cost to particular cost centers.. and the apportionement means charging of overhead cost to all the cost centers on some basis... it depends on the nature of expenses..

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  3. do u apportion machinery maintenance on the basis of machine hours or machinery value?

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  4. i wont full distingwish between this at list 8 points , this i snot realy enoouf for me.

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  5. what is difference between absorption and apportionment of overheads ?
    plz reply .

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  6. A company has four main cost centers. It allocated overheads to the four departments as follows:
    Dept: Cost (K)
    A 672,000
    B 420,000
    Repairs 84,000
    Maintenance 56,000
    In addition, there are general overheads of K308, 000 which should be apportioned:
    A: 40% B: 30% Repairs: 20% Maintenance: 10%

    A and B are production departments. Repairs and Maintenance service production as follows:
    A B Repairs Maintenance
    Repairs 60% 40% - -
    Maintenance 40% 40% 20% -

    Budgeted labour hours:
    A: 40,000 hours; B: 8,000 hours

    Budgeted machine hours:
    A: 5,000hours; B: 60,000 hours

    Calculate an overhead absorption rate for each production department.
    Some one help me with this question.

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