Page 59 - BA2 Integrated Workbook - Student 2017
P. 59
Overhead analysis
Allocation and apportionment
Once we have broken down the production department into suitable production and
service cost centres, we must determine the overhead cost for each cost centre.
Fixed production overhead
Production Production Service
cost centre1 cost centre 2 cost centre
2.1 Allocation
Allocation is possible for costs which we can identify as specifically attributable to a
particular cost centre. For example the salary of the cost centre manager can be
allocated directly to the cost centre. After the allocations, the overhead analysis sheet
might look like this:
Overhead item Basis Prod cost Prod cost Service cost Total
centre 1 centre 2 centre overhead
$ $ $ $
Manager salary Allocation 50,000 55,000 48,000 153,000
Indirect materials Allocation 2,500 12,000 0 14,500
Equipment Allocation 5,700 4,600 0 10,300
maintenance
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