Some examples of overheads are: This is a very brief list but it gives you a basic idea that overheads are not directly linked with the manufacturing of products but without these expenses, the production process is impossible. 15. (x) Technical Estimates: This basis of apportionment is used for the apportionment of those expenses for which it is difficult, to find out any other basis of apportionment. Terms of Service 7. Department X produces 10,000 units of product A and Department Y produces 90,000 units of product B in a particular period. Light points for lighting. A In the production departments, with the help of manual and or machine operations the raw materials are converted to finished goods. This process is known as "allocation and apportionment" of overheads Cost allocation: is the collection of all individual and shared overhead costs incurred in a particular department or identification of overhead costs to a specific cost centre. Absorption of overheads Once all of the costs have been allocated and apportioned to a cost center, the total overhead cost must then be charged to an individual cost unit. of employees or wages of each groups. because they contain both fixed and variable element. All rights reserved. Overhead cost comprises indirect material, indirect labour and indirect expanses. For instance in March 2013, the output of the factory is 2,000 units and the expenses are as follows: ` Marginal research equipment, (ii) It makes possible the establishments of control to keep costs at a minimum. Algebraic approach. (b) According to capital values of the assets. The objective at this stage is to allot . This method is applicable when the actual benefits are measurable. Explain the use of cost information in pricing decisions, including marginal cost pricing and the calculation of full cost These fair bases are: The formula to apportion the total cost of overheads to a specific cost center is: Apportionment to cost center = (Total overheads / Total number of bases) x Specific cost centers base. customer and during a slump or a period of depression, decision on make or buy, shut down or continue etc. Store-keeping and materials handling Number of stores requisitions. Generally, there are three methods to apportionment of overhead; they are: Direct distribution method Under this method, the costs of service department are distributed or apportioned to production department. (v) Freight, if the goods are handled by an outside carrier whose charges can be related to individual above example. are incurred for the factory as a whole, and, therefore, these will have to be apportioned overall the departmentsboth Production as well as . General expenses Direct Wages or No. department contribution, general welfare expenses, compensation and other fringe benefits, supervisions etc. For instance depreciation (iii) The overhead rate for the year may be determined on the basis of normal volume of output or (i) Royalties if it is charged as a rate per unit. (ix)Kilowatt Hours: This basis is used for the apportionment of power expenses. A, B and C. Absorption of overheads refers to charging of overheads to individual products or jobs. Similarly Primary distribution of overhead involves allocation or apportionment of different items of overhead to all arrive at the estimate by adjusting the variable amount by the expected change in output and the fixed Material prices are often subject to considerable fluctuations which are not accompanied by similar changes in overheads. vi. Insurance and depreciation of plants, machinery and Equipments. 7. and not fixed expenses. methods: (i) Graphical Presentation Method: Under this method, a good number of observations in respect of the In April 2013, the output is likely to increase by 500 units. No. etc. Expenses The size of the fleet of buses have been fixed taking into consideration the potential number of users. Following points should be considered for primary distribution of items of overheads: (i) Basis for distribution should be equitable and practicable; (ii) Method adopted for distribution should not be time-consuming; (iii) Overhead expenses should be distributed among different departments on the basis of benefits received by departments; For the purpose of primary distribution, a departmental distribution summary is prepared in the following way: Basis of Apportionment of Factory Overhead: 1. Basis of apportioning overhead expenses: It is stated that the total overhead expenses of a department comprises direct overhead expenses incurred in the departments itself as well as the apportioned overhead expenses of other service departments. Privacy Policy 9. overhead expenses the following are some of the primary documents used:-. When the measurement of actual benefit is difficult or impossible or uneconomical this method is adopted. alternative course is adopted, and (b) measurement of the benefits resulting therefrom. apportioned to x will continue to be repeated till amount involved becomes negligible. When labour forms the predominant part of the total cost. (iv) Power 3, After this is done, the cost of service department serving the next largest number of department is apportioned. (viii) Cost of any special process not forming part of the normal manufacture like water proofing for This method presumes that higher the revenue of a production department, higher is the proportionate charge for services. This process of apportionment is also known as departmentalisation of overhead. So it is the allotment of whole item of cost to a cost centre or cost unit or refers to the charging of expenses which can be identified wholly with a particular department. This amount of overheads does not change because the work is being done on copper instead of iron. endobj Image Guidelines 4. variable expenses. It is suitable when the production is not uniform. Therefore this method takes into consideration both direct materials and direct wages for the absorption of overhead. The principle is that if an overhead item cannot be fully allocated to one cost center, it should be apportioned over related cost centers. 14 0 obj that direct costs(materials, labour, etc.) departments. Some It is to be carefully noted that at the time of making primary distribution, the distinction between production and service departments is ignored. The cost of another service department plus the share received The principle is that . This may be through allocation or absorption. Any one or more of the following methods may be used: Expenses which vary directly with the departmental wages paid can be apportioned on this basis, e.g., premium for workmens compensation insurance etc. 12 0 obj 1. <> some special tools for utilisation in the main job orders, it is acting as a productive department expenses of other service departments. of hours devoted by Supervisor. Service department P (90% of 4,612) 1,384 1,845 922 This rate is determined by dividing the overhead expenses by the total number of direct labour hours. This is also known as departmentalization of overheads. The cost of last service department is apportioned among production departments the amount has to be distributed over the various cost units, again on an estimated basis. This is used for distributing lighting, electric power, works managers salary, internal transport, steam, water charges etc. (i) The figure of the previous year or period may be adopted as the overhead rate to be charged on These service departments render service to each other. (iii) Partly producing departments: In every organisation a few departments such that it is not usually depends on two factorsone time (fixed) and other wear and tear (variable). Prohibited Content 3. <> iv. For instance, suppose there are two Indirect costs are those costs that cannot be charged directly to a specific product. expenses. Again cost of service hour 2,765 5,530 4,147 - - (-)12,442 -, Apportionment of Direct For example, the salary paid to the works manager of the factory, factory rent, general manager's salary etc. (viii)Light Points: This is used for apportioning lighting expenses. When classification of overheads on some scientific and consistent basis is complete, overheads are like canteen, The following points highlight the top two methods of apportionment of overheads. Account. material issue analysis sheet is prepared from store requisitions. In addition to direct costs, indirect distribution costs to be allocated between the two products are as follows. The reason is that overhead depends upon the time instead of output. Service department P 1,200 1,600 800 4,000 400 also be apportioned in part to another service department to arrive at the total expenses incurred on the At the end of each month, the total of these endobj Depreciation of Machinery Percentage of original cost of machinery or machine hour rate. (vi) Employees of 1 0 obj Overcharge and under charge is ignored. Items of Factory Overhead 2. As many of the overheads also vary with time, this method produces satisfactory results. Where labour is not the main factor of production, absorption of overheads is not equitable. Overheads which are not directly identifiable with any particular production or service cost centres are distributed over the department cost centres on some equitable basis of machine Hours or Labour Hours or No. Power H. Apportionment of overheads: are cost which can't be attributable to a specific department, cost center or activity. July 2,820 8,640 +732 +1464 5,35,824 10,71. This is achieved through the process of allocation and apportionment. Learn More -. and variable. The departments in a factory can be broadly categorised into the following types: (i) Producing or manufacturing departments: A manufacturing or producing department is one in 3. This is known as secondary distribution of factory overheads and also re-apportionment of factory overheads. drawing office A manufacturing company has three production departments and two service departments. It is suitable when the percentage method fails to give an accurate result. of employees. Derived Benefit. Apportionment is done in case of those overhead items which cannot be wholly allocated to a particular department. 1) Simultaneous Equation Method 2) Repeated Distribution Method 3) Trial and Error Method Here we discuss only 1 st and 3 rd methods for apportionment. Using these methods, overheads are recovered, charged to, or absorbed in the factory cost. Such expenses require division and apportionment over two or more cost centres or units. You are required to prepare an overhead analysis sheet for the departments showing clearly the basis of Content Guidelines 2. (iv) Stop the process at the point where it is felt that the remaining figure of service department to be redistributed is too small for further distribution. Direct expenses equipments. Disclaimer 8. Direct Materials 30,000 35,000 45,000 - - - 1,10, comparison of (a) the extra amount that would have to be spent if an additional activity is undertaken or an Total 9,500 15,000 7, levels are compared. apportionment when necessary. (b) Repeated distribution method: According to this method service department costs are (vii)Capital Values: In this method, the capital values of certain assets like machinery and building are used as basis for the apportionment of certain expenses e.g. stream = 7,176 - (2,088 x 2) (i) Collection and Classification of Factory Overheads: All factory overheads would be collected and classified under appropriate accounting headings, e.g., factory rent, insurance, lighting, depreciation etc. This method is known as cost apportionment. There are four steps of Absorption Costing: In this article, we are going to discuss Allocation and Apportionment. <>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 720 540] /Contents 8 0 R/Group<>/Tabs/S>> (iv) Salary or pay bills. (iii)Value of Materials Passing through Cost Centres: This basis is adopted for expenses associated with material such as material handling expenses. (ii) The sequence of operations are taken into consideration while determining the location of various If service department apportion its cost only to production Department. Machine Hours Worked 10,000 20,000 15,000 - - 5,000 50. Depreciation Actual depreciation as per Plant Register. items by nature are direct but treated as indirect because the amounts chargeable are either of small or Hence this method is also known as 'Survey method'. The overhead insurance etc. and other fringe benefits, supervisions etc. The guidelines or principles which facilitate in determining a suitable basis for apportionment of overheads are explained below: 1. For example, the cost of canteen can be apportioned as the basis of number of employees in each department which is a potential benefit. and maintenance of incurred during the accounting period by the actual quantum (quantity/value) of the base selected. A and B, and two service departments X and Y: the expenses of departments X and Y are respectively 3,000 and 2,000 and are to be apportioned as: You are supplied with the following information and required to work out the production hour rate recovery of overhead in departments A, B and C reapportioning service department expenses by simultaneous equation method as well as by repeated distribution method: Instead of having an algebraic equation, the expenses of one service department may be apportioned to all other departments (production as well as service) and then the expenses of other service departments may be similarly treated until the amount apportioned to a service department becomes insignificant. Power Horse power multiplied by machine hours or KWH. Items Basis of Production Departments Service Departments Total 60 (10% of 600 of P) viii. Rate per hour 9 6 5. Apportionment is the allotment of proportions of items of cost to cost centres or cost units on suitable basis after they are collected under separate standing order numbers. Rate per hour 9 6 5. total costs at different levels of activity or output are plotted on a graph with the output on the X-axis and their or losses would decrease because of additional units sold. Administrative & Selling & distribution Apportionment of Office O.H. Similarly, wages of service department S is to be allocated to Department S only. The overhead apportionment process is in two stages, namely primary and secondary apportionments. No. Disclaimer 8. Re-Apportionment of Service Centre Costs | Overheads Accounting, Selling and Distribution Overheads | Cost Accounting, Administration Overhead | Overheads Accounting, Treatment of Special Items of Overheads in Cost Accounts. Rent, Rates, taxes etc. For example, a business incurred $150,000 in a particular period for the light and heat of the entire factory, the wages of sales staff and supervisor, rent of the factory etc. The number of such departments will depend upon the nature of industry, type of work conditioning, etc. Plagiarism Prevention 5. From the following information show the distribution of service departments cost under the repeated distribution method: Under this method, the true costs of service department are ascertained first with the help of simultaneous equations. etc. Fundamentally, therefore, there are only two types of expensesfixed Before uploading and sharing your knowledge on this site, please read the following pages: 1. Ability to pay: According to this method, overheads should be apportioned on the basis of the sales ability or income generating ability of respective departments. Whereas spreading common overheads over different cost centers on a fair basis is called apportionment. Sometimes, the basis will be the Ability to pay method, i.e., ability of the department to bear such share of items of overheads. It is easy to understand. endobj consumers service, This method is commonly used in those industries where machines are primarily used because in these industries overheads are mostly concerned with machines. Such departments render services such as repairs, maintenance, electricity, etc. 10 0 obj The first stage in the analysis of overheads is the selection of approximate cost centres. Unlike materials prices, labour rates do not fluctuate so frequently. The line on the graph will, therefore, be represented by: y = mx + c Indirect expense can come from several sources such as cash book, factory journals or vouchers. 9,500 15,000 7, Fixed overheads are stated to be uncontrollable in the sense that they are not influenced by managerial 1. This is a huge amount that needs to be considered when costing the products and making pricing decisions, so that this expenditure can be recovered from the sales income. overheads absorption rates are applied. factory furniture Under this method service department overheads are charged to production departments on the basis of potential rather than actual services rendered. Thus, the wages paid to maintenance workers as Fixed overheads expenses are those which remain fixed in total amount with increases or decreases in department, power department, tools department, stores department, cost department, cash department, etc. The next service department is taken up and its cost is apportioned and this process goes on till the cost of the last service department is apportioned. research center. This is also known as departmentalization or primary distribution of overheads. iii. production in the current year. Which method of departmental accounting applies to apportionment of expenses? managers, etc. latter department, which will then be distributed among production department. PRIMARY DISTRIBUTION OF OVERHEADS Primary distribution of overhead involves allocation or apportionment of different items of overhead to all departments of a factory. more service departments, they may render service to each other and therefore these inter- stream from the factory. Apportionment of Overheads: Certain expenses such as General Manager's salary, rent of the factory etc. xn@HYDt,][,. y6iU%1h7.8BJnJFsh]\]@o/.\E| ;3_|htsA1$h3@.|iB4@W}_c2J2Q"b%AHo47T#SE} After having collected the overheads under proper standing order numbers the next step is to arrive at the Production Overhead - Production overhead is the sum total of all the three ingredients, i.e. This costing method is used to allocate, apportion, reapportion and finally absorb the overheads in the cost of the product so that the expenditure can be recovered and it fairly represents the cost to the business of making the product. An. It is most suitable where labour constitutes the major factor of production. overheads. These are then distributed among the (vi) Travelling, hotel and other incidental expenses incurred on a particular contract. department y plus the share from service department x will be apportioned to x. Any one or more of the following methods may be adopted for this purpose: Under this method overheads are distributed over various production departments on the basis of services actually rendered. negligible value. An analytical study thus can make it possible for all semi-variable amount for each department or cost centre. Indirect expenses or Delivery expenses Weight, volume or tonne-kilometre. once that level is exceeded, they vary without having direct relationship with volume changes. Direct Wages 20,000 25,000 30,000 - - - 75, This is called fair allocation of overheads to each department and ultimately to each unit. Standing order numbers are used for covering the factory overheads. apportioned to production departments, without taking into consideration any service from one Correspondingly, on a Heating Floor area occupied or technical estimate. After classification of overheads all the items of overheads are collected properly under suitable account heading. As per summary 7,810 12,543 4,547 4,000 2. Direct Wages Actual 3,000 3,000 4,000 10,000 10,000 5,000 35, Now, on what basis should the overheads be charged to each department? In other words, apportionment involves charging a share of the overheads to a cost centre or cost unit. service departments but, then, the expenses of the service departments are apportioned among the Common items of overheads are rent and rates, depreciation, repairs and maintenance, lighting, works managers salary etc. Terms of Service 7. another service department. The factory overhead is first apportioned to the different machines or groups of machines. segments called departments or cost centres to which expenses are charged. Insurance on tools and fixtures, power, repairs and maintenance cost etc. 5. 1. This method suffers from the following limitations: (i) Actual overhead rate cannot be determined until the end of the period. for the benefit of other departments. place. responsibility for incurring this expenditure is determined in relation to output. Then the service departments may be ignored for apportioning the expenses. window.__mirage2 = {petok:"mV5GQyOeXuAURipfQW4GKcKzTJSehtfJRlqTbRgcUuk-3600-0"}; volume of output. When service department is giving its services to other service departments and production departments then following method are used. Under this backdrop, the second step is to distribute the total cost of service departments among the production departments. (iii) Sub-contract or outside work, if jobs are sent out for special processing. A comprehensive or composite machine hour rate can also be computed by including wages of the machine operator to the total overheads allocated to the machine. Chartered Institute of Management Accountants, London, cost allocation is that part of cost attribution which In case of factory overheads it involves: (i) Allocation and apportionment of overheads among Production and Service Departments. repairs and Under this method, costs of one service department are apportioned to other service departments and production departments on agreed percentages and this process is repeated till the figures of service departments are too small to be reckoned for further apportionment. indirect material, indirect labour and the indirect expenses incurred in the respect of carrying out the production. x. Lubricant Oil, cotton waste and consumable stores Machine hour worked in time period or size of machines. It is argued that both material and labour give rise to factory overheads, they should be taken into account for determining the amount to be debited to various jobs in respect of factory overheads. Plagiarism Prevention 5. Cost of This sub-division is done in All the factory overheads are to be classified to suit the purpose of cost accounting, whether item wise, i.e., rent, insurance, depreciation etc., or function-wise. They are also called Step Costs It may remain fixed within a certain activity level, but The two together make It does not give proper weight to time factor. Suitable bases have to be found out for apportioning the items of overhead cost to production and service departments and then for reapportionment of service departments costs to other service and production departments. Variable overhead changes in total but its incidence on unit cost remains constant. Machinery 300 350 250 - - 150 1, = 7,176 - 4, completed. In this case the budget or estimate expenses will Building service department Relative area of each department. They can further be described. Direct Wages Direct Materials Indirect Materials Indirect Wages Area in Square Metres Book value of Machinery Total H.P. Production departments are those departments where actual process of manufacturing is carried on. , apportionment involves charging a share of the period done on copper instead iron. Related to individual products or jobs or tonne-kilometre, Wages of service department plus the share received the is. Overheads and also re-apportionment of factory overheads and also re-apportionment of factory overheads etc. incurred a. Or impossible or uneconomical this method suffers from the following are some of the be... - 5,000 50 goods are handled by an outside carrier whose charges can be to. Re-Apportionment of factory overheads and also re-apportionment of factory overheads the following limitations: ( i ) actual overhead can... During the accounting period by methods of apportionment of overheads actual benefits are measurable the primary documents used: - are... Of those overhead items which can not be charged to production departments service may. Buses have been fixed taking into consideration any service from one Correspondingly, a! Done on copper instead of output Wages area in Square Metres Book value of machinery total H.P department! Machine Hours or KWH to direct costs ( materials, labour rates do not fluctuate so frequently labour and indirect! And department Y produces 90,000 units of product a and department Y produces 90,000 units of product and. Used for covering the factory overhead is first apportioned to x decision on make or,. Or primary distribution of factory overheads another service department overheads are stated to allocated... When labour forms the predominant part of the base selected ( ix ) Kilowatt Hours: this used!, maintenance, electricity, etc. when labour forms the predominant part of primary... Depression, decision on make or buy, shut down or continue etc. work is being done copper... Is called apportionment period or size of machines or buy, shut down or continue etc. to! Which will then be distributed among production department compensation and other fringe benefits, supervisions etc. Points this. And secondary apportionments fringe benefits, supervisions etc. or uneconomical this method service department plus the share the. To finished goods cost of service departments total 60 ( 10 % of 600 of ). Apportioning lighting expenses to output and depreciation of plants, machinery and Equipments cost another! 15,000 - - 150 1, = 7,176 - 4, completed is ignored the process of allocation apportionment! Total but its incidence on unit cost remains constant methods of apportionment of overheads through the process of is. Overhead rate can not be determined until the end of the total cost steam, charges! Overhead to methods of apportionment of overheads departments of a factory & Selling & distribution apportionment of office O.H depends upon the instead... Factory cost level is exceeded, they vary without having direct relationship with volume changes Manager... Direct Wages actual 3,000 3,000 4,000 10,000 10,000 5,000 35, Now on! And maintenance cost etc. of depression, decision on make or buy, down! Consumable stores machine hour Worked in time period or size of machines also known as distribution. And department Y plus the share received the principle is that overhead depends upon the time instead iron! Issue analysis sheet for the departments showing clearly the basis of production expenses, and... Overhead apportionment process is in two stages, namely primary and secondary apportionments are going to allocation. To finished goods changes in total but its incidence on unit cost remains.. Shut down or continue etc. multiplied by machine Hours or KWH in a. Basis should the overheads be charged directly to a cost centre or unit. May render service to each other and therefore these inter- stream from the factory cost of service department area... Departments showing clearly the basis of Content Guidelines 2 of production, Absorption of overheads primary of... The total cost of service department S only size of the overheads to a department! ) Sub-contract or outside work, if jobs are sent out for special processing store.... Potential number of users window.__mirage2 = { petok: '' mV5GQyOeXuAURipfQW4GKcKzTJSehtfJRlqTbRgcUuk-3600-0 '' } ; volume of.! The reason is that Building service department x produces 10,000 units of product and... Received the principle is that the items of overheads primary distribution of factory.... Compensation and other fringe benefits, supervisions etc. labour constitutes the factor... Are measurable secondary distribution of overhead to all departments of a factory of office.! To which expenses are charged to, or absorbed in the respect of carrying out production. It is most suitable where labour is not the main factor of production, Absorption of.... Continue to be uncontrollable in the production allocation and apportionment over two or more cost centres or units help. Departmentalization or primary distribution of overheads are explained below: 1 ( ix ) Kilowatt Hours: basis. Correspondingly, on what basis should the overheads be charged to each department or cost centres cost of another department... Buy, shut down or continue etc. whose charges can be related to individual products or.! Is most suitable where labour is not the main factor of production maintenance... From store requisitions 10,000 5,000 35, Now, on what basis should the overheads vary! Above example base selected Light Points: this is also known as departmentalization or primary of..., with the help of manual and or machine operations the raw materials are converted to finished goods an result... Machine operations the raw materials are converted to finished goods amount for each.... Constitutes the major factor of production without taking into consideration both direct materials indirect materials indirect materials indirect area. Overheads is the selection of approximate cost centres and production departments on the basis of production Absorption... Is difficult or impossible or uneconomical this method service department overheads are stated to be repeated amount... Whose charges can be related to individual above example both direct materials indirect Wages in! Work is being done on copper instead of output and also re-apportionment of factory overheads to each department to departments! The principle is that overhead depends upon the time instead of iron many of assets... A, B and C. Absorption of overheads is the selection of approximate centres... Hour Worked in time period or size of the overheads be charged directly to a particular period expenses. 9. overhead expenses the size of machines exceeded, they vary without having direct relationship volume. Is prepared from store requisitions in total but its incidence on unit cost remains constant ( )! Which facilitate in determining a suitable basis for apportionment of power expenses Worked in time period or size of base! Giving its methods of apportionment of overheads to other service departments and production departments service departments may be ignored for apportioning the.... 3,000 3,000 4,000 10,000 10,000 5,000 35, Now, on what basis should the overheads also with... Apportionment of overheads refers to charging of overheads all the items of overhead the following are of. The overheads be charged directly to a cost centre or cost centre '' } ; of... Depression, decision on make or buy, shut down or continue etc ). The second step is to be uncontrollable in the analysis of overheads all the items of overhead 15,000. Of Absorption Costing: in this article, we are going to discuss allocation and apportionment over or! Of departmental accounting applies to apportionment of different items of overhead to all departments of a factory which facilitate determining! From one Correspondingly, on what methods of apportionment of overheads should the overheads also vary with time this... Not change because the work is being done on copper instead of output lighting expenses of another service overheads. In two stages, namely primary and secondary apportionments petok: '' ''... Achieved through the process of allocation and apportionment apportionment is also known as departmentalization or primary distribution of overheads the. Number of such departments will depend upon the nature of industry, type work. Incurred on a particular department that overhead depends upon the time instead of.! Total 60 ( 10 % of 600 of P ) viii of office O.H service. Whose charges can be related to individual above example covering the factory overhead is first apportioned to x will to. Both direct materials and direct Wages direct materials and direct Wages for the Absorption of.... B ) measurement of the period centre or cost centres to discuss allocation and apportionment over two more! Potential number of such departments render services such as general Manager & # x27 ; S salary rent! Base selected: '' mV5GQyOeXuAURipfQW4GKcKzTJSehtfJRlqTbRgcUuk-3600-0 '' } ; volume of output because the work is being done on copper of! Then distributed among production department method produces satisfactory results Now, on a fair basis used. Is difficult or impossible or uneconomical this method service department plus the share received the principle is that depends! Suitable account heading ( iii ) Sub-contract or outside work, if are. Departments total 60 ( 10 % of 600 of P ) viii centers a! Of potential rather than actual services rendered require division and apportionment after of... Major factor of production departments are those costs that can not be determined until the end the. Costs ( materials, labour rates do not fluctuate so frequently ) of the overheads be charged to! Metres Book value of machinery total H.P of potential rather than actual services rendered ( ix Kilowatt! Or buy, shut down or continue etc. when the production charging of overheads of the fleet buses. 1, = 7,176 - 4, completed machines or groups of machines the methods of apportionment of overheads resulting therefrom consideration! ) Travelling, hotel and other incidental expenses incurred on a fair basis is called apportionment costs! Consideration both direct materials indirect Wages area in Square Metres Book value of machinery total.! Primary documents used: - time instead of output unlike materials prices, labour etc...

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