Apportionment, absorption &

allocation of overheads
Group no : 4
 Topics To Be Covered:

• Introduction to overheads
• Allocation & absorption of overheads
• Manufacturing/ production overhead
• Office & administration overhead
• Selling & distribution overhead
• Predetermined factory overheads
• Treatment of special items
 Introduction To Overheads
• Cas- 3 “overheads”, issued by ICWA, India
states that: overheads comprise of indirect
employee cost & indirect expenses which are
not directly identifiable or allocable to a cost
object in an economically feasible way”

• Classification :
1.production overheads
2.Office & administration overheads
3.Selling & distribution overheads
Procedures of ascertaining total cost

• Allocation of overheads
• Absorption of overheads
Production overheads

• functions

• Absorption &
allocation of
production
overheads
 Office & administrative overheads

• Functions of
administrative
overheads

• Allocation &
absorption of
overheads
Selling & distribution overheads

• functions of selling
& distribution
overheads

• Allocation &
absorption of
overheads
 Predetermined factory overheads

• Usually calculated before incurring

the cost. i.e. quotation.
• Objective
 Treatment of special items

• Depreciation
• Interest on capital
• Obsolescence
• Research & development expenses
• Repairs and maintenance expenses
• Transport charges
• Training expenses
Thank you