Everything you need to know about the classification of overheads. Classification is the process of grouping like facts under a common designation on the basis of similarities of nature, attributes or relations. Classification of Overheads is the process of grouping of indirect costs on the basis of common characteristics and clear objectives. All overhead expenses are grouped together under common [...]
Different methods of absorption discussed below are used to determine the overhead absorption rate for production overhead: 1. Percentage on Direct Material Cost 2. Direct Labour Cost Percentage Rate 3. Prime Cost Percentage Rate 4. Labour Hour Rate 5. Machine Hour Rate 6. Rate Per Unit of Output 7. Standard Rate. Method # 1. Percentage on Direct Material Cost: Under [...]
In this article we will discuss about the treatment of special items of overheads. 1. Interest on Capital: Different people have different of opinion on the question as to whether interest on capital should be included in cost or not. This so because, whether a concern pays interest on capital or not, depends upon its method of capitalisation. This means [...]