Cost apportionment is the process of distributing general overheads to cost centers or departments. An appropriate base quantity such as floor area or kilowatt hours is used to calculate the apportioned overhead.
Cost Apportionment of General Overhead November 6th, 2016Team
A business needs to separate period and product cost as product costs are included as part of the inventory until the product is sold, whereas period costs are treated as an expense in the income statement in the period in which they are incurred.
In a standard costing accounting system, fixed manufacturing overhead has two main variances budget and volume. Fixed overheads are those costs which do not vary in response to the level of production output. To operate a standard costing system and allocate fixed overhead, the business must first decide on the basis of allocation, and calculate the standard fixed overhead allocation rate.
In a standard costing accounting system, variable manufacturing overhead has two main variances rate and efficiency. Variable overheads are those costs which vary in response to the level of production output but which cannot be attributed to individual units of production. To operate a standard costing system and allocate variable overhead, the business must first decide on the basis of allocation.