Theoratical Model Apparel/Confectionary/Tyre Consultancy/Software

Direct Material Indirect Material Direct Material Indirect Material Direct Material Indirect Material

+ + + + + +
Direct Labour Indirect Labour Direct Labour Indirect Labour Direct Labour Indirect Labour

+ + + + + +
Direct Expenses Indirect Expenses Direct Expenses Indirect Expenses Direct Expenses Indirect Expenses

= = = = = =

Prime Cost Overhead Prime Cost Overhead Prime Cost Overhead

Overhead Absorbed Overhead Absorption Rate

Product Cost
 Activity 1

Dept. 1 Dept. 2 Dept. 3 Dept. 1 Dept. 2 Dept. 3

Activity 2

Uniform Overhead Rate Plant-wide Overhead Rates Departmental Overhead Rates Activity Based Overhead Rates

Uniform OH Rate = Plant Overhead Plant-wide OH Rate Plant Overhead Dept. OH Rate = Departmental Overhead Activity OH Rate = Activity Overhead
Total Plant Output Plant Level Cost Drivers Department Cost Driver Activity Cost Driver

DL hours
MachineHours
Kilograms
Ltrs Labour Intensive

Machine Intensive
 Specific Order Costing Continuous Operations Costing

Job Production Batch Production Contract Production Assembly Line Manufacturing Process Manufacturing Service Costing Mass Customisation
 TRADITIONAL OVERHEAD RATES ACTIVITY BASED OVERHEAD RATES

Resource Costs Resource Costs

Natural Accounts Natural Accounts
Manufacturing,
Manufacturing Electricity Marketing, Electricity
Costs Maintenance Distribution, Sales Maintenance
Rent Costs Rent
Insurance Insurance
Welfare Welfare
Consumables Consumables

Department Cost
Activity Cost Drivers
Drivers

Department 1 Department 2 Department 3 Activity 1 Activity 2 Activity 3

Departmental OH Activity Based OH

Absorption Rates Absorption Rates

COST OBJECTS Product 1 Product 2 Product 1 Product 2

COST OBJECTS Customer 1 Customer 2

Channel 1 Channel 2