CLASSIFICATION OF OVERHEADS

FUNCTIONS ELEMENTS
1. Factory Overheads 1. Indirect Materials
2. Administrative Overheads 2. Indirect Labour
3. Selling Overheads 3. Indirect Exp / OH
4. Distribution Overheads

SEGREGATION OF SEMI VARIABLE OVERHEADS :

1 High and Low Point method - in class

2 Method of Averages -not to be done
3 Scatter Diagram /Graphical Method - not to be done
4 Simultaneous Equation Method - not to be done

Prod SVC VC/ut TVC TFC

highest 800 22,000 15 12,000 10,000
lowest 400 16,000 15 6,000 10,000
400 6,000

VC per unit 15
BEHAVIOUR
1. Fixed Overheads
2. Variable Overheads
3. Semi Variable Overheads
 units SVC VC / unit TVC TFC
Highest 2,000 40,000 15 30,000 10,000
Lowest 400 16,000 15 6,000 10,000
Difference 1,600 24,000
1?

Solution 1

HIGH AND LOW POINT METHOD :

Variable Cost per unit = Difference in semi variable costs

Difference in production

= 40000 - 16000
2000 - 400

= Rs. 15/- p.u.

Therefore,

Fixed Cost = Total Semi Variable Costs-Total Variable Cost

= 40000 - (2000 x 15) OR = 16000 - (400 x 15)

= Rs. 10,000

(This formula can be applied for any level of production)

= 34000 - 28000
1600 - 1200

=Rs. 15/- p.u.

 IN THE BOOKS OF S.N. ENGINEERING COMPANY
OVERHEAD DISTRIBUTION SUMMARY FOR THE 6 MONTHS ENDED 30/9/2016

Particulars Basis of apportionment PRODUCTION DEPARTMENT

A B

Direct wages Given - -

Direct Materials Given - -

Stores Overheads Direct Materials 1,200 1,000

(3 : 2.5 : 2 : 1.5 : 1)

Motive Power KWH (elec) 4,800 3,600

(8 : 6 :6 :2 :3)
Electric Lighting Light points 400 600
(10 : 15 :15 :5 :5)

Labour Welfare No of employees 10,000 7,500

(4 : 3 : 3 : 1 : 1)

Depreciation Asset Value 25,000 15,000

(5 : 3 : 2 : 1 : 1)

Repairs and Maintenance Asset Value 5,000 3,000

(5 : 3 : 2 : 1 : 1)

General Overheads Direct Wages 35,000 30,000

(7 : 6 : 5 : 1 : 1)

Rent and Taxes Area 2,000 1,500

(8 : 6 : 6 : 2 : 2)

PRIMARY DISTRIBUTION Total 83,400 62,200

Reapportionment of Dept X 4: 3:3 16,400 12,300

Reapportionment of Dept Y 7:6:5 14,156 12,133

Total 113,956 86,633

Apportionment is also called PRIMARY DISTRUBUTION

Re apportionment can also be called SECONDARY DISTRIBUTION

A B

PRIMARY 88,333 71,525

Apportionment of D 22,669 13,601

Apportionment of E 13,397 20,096

SECONDARY 124,399 105,222

Wages 20,000 30,000

Absorption rate 622.00 350.74

(FOH/direct wages) * 100
 EERING COMPANY
THE 6 MONTHS ENDED 30/9/2016

ON DEPARTMENT SERVICE DEPARTMENT TOTAL

C X Y

- 10,000 10,000 20,000

- 15,000 10,000 25,000

800 600 400 4,000

3,600 1,200 1,800 15,000

600 200 200 2,000

7,500 2,500 2,500 30,000

10,000 5,000 5,000 60,000

2,000 1,000 1,000 12,000

25,000 5,000 5,000 100,000

1,500 500 500 6,000

51,000 41,000 36,400 274,000

12,300 -18,500 - 22,500

10,111 - -18,400 18,000

73,411 22,500 18,000 314,500

C D E

62,767 45,338 60,287

 9,068

26,794

98,629

40,000

246.57
 IN THE BOOKS OF MADRAS MANUFACTURING COMPANY
OVERHEAD DISTRIBUTION SUMMARY (STEP LADDER METHO

Particulars Basis of apportionment SERVICE DEPARTMENT

P Q

Total Factory Overheads Given 45,000 75,000

Reapportionment of Dept P No of employees

(50: 40 : 50 : 100 : 125 :85) (45,000) 5,000

Reapportionment of Dept Q Direct Labour Hours (80,000)

(6 : 3 : 4 :3 :4)

Reapportionment of Dept R Area in Sq. Metres

(1 : 3 : 1.5 : 1.5)

Reapportionment of Dept S Direct Labour Hours

( 4 :3 :4)
TOTAL - -

Add : Factory overheads :

Dept X 300,000
Dept Y 135,000
Dept Z 160,000 595,000

595,000
AS MANUFACTURING COMPANY
UMMARY (STEP LADDER METHOD)

SERVICE DEPARTMENT PRODUCTION DEPARTMENT

R S X Y Z

105,000 30,000 193,000 64,000 83,000

4,000 5,000 10,000 12,500 8,500

24,000 12,000 16,000 12,000 16,000

(133,000) 19,000 57,000 28,500 28,500

(66,000) 24,000 18,000 24,000

- - 300,000 135,000 160,000

 IN THE BOOKS OF ADM MANUFACTURING COMPANY
OVERHEAD DISTRIBUTION SUMMARY (REPEATED DISTRIBUTION METHOD)

Basis of
Particulars apportionment PRODUCTION DEPARTMENT
A B C

Total FOH as per primary

distribution Given 63,000 74,000 28,000

Reapportionment of Dept X (40 : 30 : 20 : 10) 18,000 13,500 9,000

81,000 87,500 37,000

Reapportionment of Dept Y (30 : 30 : 20 :20) 7,350 7,350 4,900

88,350 94,850 41,900

Reapportionment of Dept X (40 : 30 : 20 : 10) 1,960 1,470 980

90,310 96,320 42,880

Reapportionment of Dept Y (30 : 30 : 20 :20) 147 147 98

90,457 96,467 42,978

Reapportionment of Dept X (40 : 30 : 20 : 10) 39 29 20

90,496 96,496 42,998

Reapportionment of Dept Y (30 : 30 : 20 :20) 4 4 2

Total 90,500 96,500 43,000

NOTE : Whenever any service department reaches an apportionment amount less than Rs. 20, the distribution aft
the last one and the amount will ne adjusted between the production departments only.

EXAMPLE 9 :

A B C

Total After primary distribution 88,333 71,525 62,766

Re apportionment of D 5:3:2 22,669 13,601 9,068
Reapportionment of E 2:3:4 13,397 20,096 26,795
Total After Re apportionment 124,399 105,222 98,629

Calculation of overheads absorption rate:

1. Deptartment A = Factory Overheads x 100 124,399 x 100

Direct Wages 20,000
2. Deptartment B = 105,222 x 100 350.74 %
30,000

3. Deptartment C = 98,629 x 100 246.57 %

40,000
MPANY
UTION METHOD)

SERVICE DEPARTMENT
X Y

45,000 20,000

-45,000 4,500
- 24,500

4,900 -24,500
4,900 -

-4,900 490
- 490

98 -490
98 -

-98 10
- 10

- -10
- -

n Rs. 20, the distribution after that will be

nly.

D E TOTAL

45,338 60,288 328,250

-45,338
-60,288
328,250

622.00 %
 IN THE BOOKS OF ADM MANUFACTURING COMPANY
OVERHEAD DISTRIBUTION SUMMARY (REPEATED DISTRIBUTION METHOD)

Basis of
Particulars apportionment PRODUCTION DEPARTMENT
A B C

Total FOH as per primary

distribution Given 63,000 74,000 28,000

Reapportionment of Dept X (30 : 30 : 20 :20) 6,000 6,000 4,000

69,000 80,000 32,000

Reapportionment of Dept Y (40 : 30 : 20 : 10) 19,600 14,700 9,800

88,600 94,700 41,800

Reapportionment of Dept X (30 : 30 : 20 :20) 1,470 1,470 980

90,070 96,170 42,780

Reapportionment of Dept Y (40 : 30 : 20 : 10) 392 294 196

90,462 96,464 42,976

Reapportionment of Dept X (30 : 30 : 20 :20) 29 29 20

90,491 96,493 42,996

Reapportionment of Dept Y (40 : 30 : 20 : 10) 9 7 4

Total 90,500 96,500 43,000

NOTE : Whenever any service department reaches an apportionment amount less than Rs. 20, the distribution aft
the last one and the amount will ne adjusted between the production departments only.
MPANY
UTION METHOD)

SERVICE DEPARTMENT
X Y

45,000 20,000

4,000 -20,000
49,000 -

-49,000 4,900
- 4,900

980 -4,900
980 -

-980 98
- 98

20 -98
20 -

-20 -
- -

n Rs. 20, the distribution after that will be

nly.
 IN THE BOOKS OF ADM MANUFACTURING COMPANY
OVERHEAD DISTRIBUTION SUMMARY (RECIPROCAL METHOD/REPEATED DISTRIBUTION METHOD

Basis of
Particulars apportionment PRODUCTION DEPARTMENT
A B C

Total FOH as per primary

distribution Given 30,000 20,000 10,000

Reapportionment of Dept 1 (20 : 40 : 30 : 10 ) 468 936 702

30,468 20,936 10,702

Reapportionment of Dept 2 (40 : 20 : 20 : 20) 1,294 647 647

31,762 21,583 11,349

Reapportionment of Dept 1 (20 : 40 : 30 : 10 ) 129 258 194

31,891 21,841 11,543

Reapportionment of Dept 2 (40 : 20 : 20 : 20) 26 13 13

31,917 21,854 11,556

Reapportionment of Dept 1 (20 : 40 : 30 : 10 ) 3 6 4

Total 31,920 21,860 11,560

NOTE : Whenever any service department reaches an apportionment amount less than Rs. 20, the distribution
be the last one and the amount will be adjusted between the production departments only.

Let Dept 1 be denoted by X

Let Dept 2 to denoted by Y

X = 2340 + 0.20 Y
Y = 3000 + 0.10 X

Simplifying the above

X = 2340 + 0.20 Y
0.10 X = -3000 + Y

Multiplying equation 2 with 10

X = 2340 + 0.20 Y
X = -30000 + 10 Y
- - -

9.80 Y = 32340

Y = 3300
X = 2340 + 0.20(3300) = 3000

IN THE BOOKS OF ADM MANUFACTURING COMPANY

OVERHEAD DISTRIBUTION SUMMARY (SIMULTANEOUS EQUATION METHOD)

Basis of
Particulars apportionment PRODUCTION DEPARTMENT
A B C

Total FOH as per primary

distribution Given 30,000 20,000 10,000

Re apportionment of Dept 1 (20 : 40 : 30 : 10) 600 1200 900

Reapportionment of Dept 2 (40 : 20 :20 : 20) 1320 660 660

31,920 21,860 11,560

The figures in red have been taken based on the working done above as per simultaneous equation method.
ANY
D DISTRIBUTION METHOD)

SERVICE DEPARTMENT
1 2

2,340 3,000

-2,340 234
- 3,234

646 -3,234
646 -

-646 65
- 65

13 -65
13 -0

-13
- -

an Rs. 20, the distribution after that will

s only.
ANY
ATION METHOD)

SERVICE DEPARTMENT
1 2

2,340 3,000

-3000 300

660 -3300
- -

eous equation method.

 IN THE BOOKS OF MODERN MANUFACTURERS LIMTIED
OVERHEAD DISTRIBUTION SUMMARY (RECIPROCAL METHOD/REPEATED DISTRIBUTION METHOD)
Basis of
Particulars apportionment PRODUCTION DEPARTMENT
P1 P2 P3

Direct wages Given - - -

Rent and Taxes Floor Space 10,000 12,500 15,000

(20 :25 : 30 : 20 : 5)

General Lighting Light Points 1,000 1,500 2,000

(10 : 15 : 20 : 10 : 5)

Indirect Wages Direct Wages 6,000 4,000 6,000

(30 : 20 : 30 : 15 : 1.95)

Power H.P. of machines

(60: 30 :50 :10 : 0) 6,000 3,000 5,000

Depreciation on machines Value of machines

(60 : 80 : 100 : 5 : 5) 24,000 32,000 40,000

Sundries Direct Wages 30,000 20,000 30,000

(30 : 20 : 30 : 15 : 1.95)

Total 77,000 73,000 98,000

Re apportionment of S1 (20 : 30 :40 10) 6,700 10,050 13,400

83,700 83,050 111,400

Re apportionment of S2 (40 : 20 : 30 :10) 4,354 2,177 3,266

88,054 85,227 114,666

Re apportionment of S1 (20 : 30 :40 10) 218 326 435

88,272 85,553 115,101

Re apportionment of S2 (40 : 20 : 30 :10) 44 22 33

88,316 85,575 115,134
Re apportionment of S1 (20 : 30 :40 10) 3 3 4
Total 88,319 85,578 115,138

No of working hours 3070 4475 2419

Machine Hour rate (Total Overheads/Machine hours 28.77 19.12 47.60

Table showing the valuation of Product X

Particulars No of hrs. MHR Rs. Rs.

Direct Material 50
Direct Labour 30
PRIME COST 80
Dept P1 4 28.77 115
Dept P2 5 19.12 96
Dept P3 3 47.60 143 354
TOTAL COST 434
MTIED
ED DISTRIBUTION METHOD)

SERVICE DEPARTMENT
S1 S2

1,500 195

10,000 2,500

1,000 500

3,000 390

1,000 -

2,000 2,000

15,000 1,950

33,500 7,535

-33,500 3,350
- 10,885

1,088 -10,885
1,088 -

-1,088 109
- 109

10 -109
10 -
-10 -
- -
 IN THE BOOKS OF A & Co
OVERHEAD DISTRIBUTION SUMMARY (LABOUR HOUR RATE)

Particulars Basis of apportionment PRODUCTION DEPARTMENT

A B

Power and Lighting Given 200 300

Supervisor's salary Given Ratio

(30 : 30 : 20 : 20) 600 600

Rent Area
(6 : 8 : 6 :5) 120 160

Welfare No of workers
(30 : 40 : 20 : 10) 180 240

Others Given 200 400

Total 1,300 1,700

Re apportionment of S (50 : 30 : 20) 500 300
Total (A) 1,800 2,000

No of Labour Hours (B)

(25 days x 8 hours x No of workers) 6,000 8,000

Labour Hour rate (A)/(B) 0.30 0.25

HOUR RATE)

SERVICE
ON DEPARTMENT DEPARTMENT
C S

360 240

400 400

120 100

120 60

400 200

1,400 1,000
200 -1,000
1,600 -

4,000

0.40