Overheads

This topic has 3 replies, 2 voices, and was last updated 8 years ago by John Moffat.

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November 21, 2017 at 6:38 am #417069
maan87
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Hi sir,

Sir wy dont we apportion overheads directly to only production departments. Why fir we apportion then reapportion from service. What is the logic behind?

Thanx
November 21, 2017 at 1:33 pm #417131
John Moffat
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Because the service departments are in the factory and do work for the production departments.
Therefore we apportion all factory overheads between all departments, and then reapportion any service department costs on the basis of what work they do for the production departments.

Have you watched my free lectures on this? The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.
November 21, 2017 at 1:42 pm #417142
maan87
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Yeah i have watched ur lectures. My point is that ultimately factory overheads will be charged to production deptts. So why not we charge whole of the factory overheads on first instance to production deptts.
Thanx
November 21, 2017 at 2:28 pm #417156
John Moffat
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Because we want to charge the overheads ‘fairly’. If a service department does more work for one production than for another department, then it is only ‘fair’ to charge more of their cost to one department rather than the other.
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