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Administration overhead

Administration overhead comprises indirect costs of general management and administration that are not properly assigned to production, selling or another distinct function. Examples may include head-office accounting and general office costs. It is normally a non-production period cost in costing statements. Identify the actual function rather than classifying every office-based employee alike: a production-planning office may support factory activity. Internal decision reports should distinguish avoidable administration costs from allocated common charges.

Worked example

Head-office administration is $24,000 per year. A product may receive an internal allocation for pricing, but the allocation does not prove the cost disappears if the product is withdrawn.

Common mistake

Do not treat a shared allocated office charge as automatically avoidable when deciding whether to discontinue a product.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA MA Direct September 2026–June 2027
FIA FMA Direct September 2026–June 2027