1. CENTRAL UNIVERSITY
1 SILICON HILLS-MILE 91
.
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2. Presentation on the
Topic:
“ OVERHEADS ”
(APPORTIONMENT OF OVERHEADS)
MOULE: COST ACCOUONTING
LECTURER: SIR ABDUL AUGUSTUS KAMASON
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GROUP NO. 2

3. GROUP MEMBERS
1. HENRY BOBSON SESAY
2. ABDULLAH IBRAHIM KAMARA
3. EDWARD JOSEPH SESAY
4. IDRISS AMID FORTUNE
5. SALAYMATU S. FULLAH
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4. .
INTRODUCTION!
• (APPORTIONMENT OF OVERHEADS)
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5. .
What is Apportionment Of
overheads?
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6. Types of Apportionment of Overheads
1. Primary distribution of overheads
2. Secondary Distribution of overheads (Re-apportionment of
service department overheads)
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7. Criteria for secondary distribution
1. Service or use method
2. Analysis or survey
3. Ability to pay:
4. Efficiency or incentive method
5. General use of indices
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8. Methods of Re-apportionment or Re-distribution
1. Direct distribution method
2. Step method
3. Reciprocal service method
• There are three methods available on Reciprocal service method for dealing with
inter service department transfer :
• Simultaneous equation method
• Repeated distribution method
• Trial and error method
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9. Illustration 2
A company’s production for the year ending 30.3.2014 is given below:
Items Production Departments
P1 P2 P3
Office Stores Work-
shop
Total
Direct Wages ` 20,000 25,000 30,000 - - - 75,000
Direct Materials ` 30,000 35,000 45,000 - - - 1,10,000
Indirect Materials ` 2,000 3,000 3,000 1,000 2,000 2,000 13,000
Indirect Wages ` 3,000 3,000 4,000 10,000 10,000 5,000 35,000
Area in Square Metres 200 250 300 150 100 250 1,250
Book value of Machinery ` 30,000 35,000 25,000 - - 15,000 1,05,000
Total H.P. of Machinery 15 20 25 - - 5 65
Machine Hours Worked 10,000 20,000 15,000 - - 5,000 50,000
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General Expenses:
(i) Rent`12,500
Insurance `1,050
Depreciation 15% of value of machinery
Power `3,800
Light `1,250
You are required to prepare an overhead analysis sheet for the departments showing clearly the basis of
apportionment when necessary.

10. Solution:
Overhead Analysis Sheet
Items Basis of
Apportionme
nt
Production Departments
P1 P2 P3
` ` `
Service Departments
Office Stores Workshop
` ` `
Total
`
Direct Materials Actual 2,000 3,000 3,000 1,000 2,000 2,000 13,000
DirectWages Actual 3,000 3,000 4,000 10,000 10,000 5,000 35,000
Rent Area 2,000 2,500 3,000 1,500 1,000 2,500 12,500
Insurance Value of
Machinery 300 350 250 - - 150 1,050
Depreciation -do- 4,500 5,250 3,750 - - 2,250 15,750
Power H.P.
machine 877 1,169 1,462 - - 292 3,800
Light Area 200 250 300 150 100 250 1,250
12,877 15,519 15,762 12,650 13,100 12,442 82,350
Apportionment of
workshopO.H. Machine
hour 2,765 5,530 4,147 - - (-)12,442 -
Apportionment of Direct
StoresO.H. material 3,573 4,168 5,359 - (-)13,100 - -
Apportionment of
Office O.H. Direct
wages 3,373 4,217 5,060 ( - ) 12,650 - -
22,588 29,434 30,328 - - - 82,350
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11. Illustration 3
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• A factory has two service departments P and Q and three production departmentsA, B, and C.You are supplied with the following information:
Particulars Total Production Departments Service departments
A B C P Q
Rent 12,000 2,400 4,800 2,000 2,000 800
Electricity 4,000 800 2,000 500 400 300
Indirect labour 6,000 1,200 2,000 1,000 800 1,000
Depreciation of machinery 5,000 2,500 1,600 200 500 200
Sundries 4,500 910 2,143 847 300 300
Estimated working hours 1,000 2,000 1,400 4,000 2600
Total Production Departments Service departments
Particulars
A B C P Q
P 30% 40% 20% — 10%
Q 10% 20% 50% 20% —
Expenses of Service Departments P and Q are apportioned as under:
You are required to show the apportionment of overheads under
different methods of apportioning inter- service department’s overheads
and also to work-out the production hour rate recovery of overheads in
departments A, B and C.

12. Solution:
Overhead Analysis Sheet
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13. 1/11/2023
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•What is ABSORPTION OF
OVERHEADS?

14. Actual Overhead Rate:
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• Formula
Actual Overhead Rate =
Actual Overhead for the period
Actual quantity or value of the base for the period

15. Pre-determined Overhead
Rate:
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• Formula
Budgeted base for the period
Pre-determine =
Budgeted Overhead for the period

16. Blanket and Multiple Overhead
Rates:
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Formula
Overhead Cost for the entire factory
Base for the period
Blanket overhead rate =

17. Overhead rate:
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Formula
Overhead cost allocated and apportioned to each cost center
Overhead rate =
Corresponding base

18. SUMMARY:
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