Overhead Analysis Flashcards
1
Q
Overhead costs…
A
Are expenditure on labour, materials or services that cannot be economically identified with a specific saleable cost unit.
2
Q
Overheads can be shares out to individual cost units using a three step process…
A
- Allocation and Apportionment
- Reapportionment
- Absorption
3
Q
Cost allocation is possible when…
A
A cost is specifically identifiable against a particular cost centre.
4
Q
Cost apportionment is necessary when…
A
It is not possible to allocate a cost straight to a cost centre and is therefore shared out based on the anticipated benefit received.
5
Q
The Overhead Absorption Rate (OAR) =
A
(Overhead)/(Quantity)
