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John Moffat.
John Moffat.-
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AkshayD19
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Hello. Why is there no need for a single product company to allocate and apportion overheads in order to determine overhead cost per unit?
Can you give an example?
Thanks
John Moffat
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Because all of the overheads only relate to one product. We only need to share the overheads between products when there is more than one product.
Have you watched my free lectures on the allocation and absorption of overheads, because I work through lots of examples in the lecture. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
AkshayD19
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Yes I have watched them sir but I don’t understand..please help me!
Thanks
John Moffat
- Topics: 57
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The only reason for allocating and absorbing is to be able to spread the overheads between several products.
If they only make one product then if (for example) the total overheads are $100,000 and if they produce 10,000 units, then the overheads per unit are 100,000/10,000 = $10.
Only if there are two or more products do we have to find a way of deciding how much of the overheads should be given to each of the products.
I do suggest that you rewatch the lectures.
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