Overhead Absorption

Overhead Absorption: Definition Overhead absorption is defined as the allotment of overheads to cost units. When the amount of overheads has been determined on the predetermined basis for each cost center, the next step is to charge it to production. This involves taking each cost center and applying its overheads to all the products that pass through it. This application of overheads is called ab…

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Departmentalization of Overheads

Definition Departmentalization of overheads refers to the process of determining the overhead costs of each department involved in production. Explanation To achieve departmentalization, the departments in a factory are divided into two categories: production departments and service departments. Also, departmentalization of overheads is undertaken in two stages: Allocation of overheads Apportionme…

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Apportionment of Overhead Expenses

Apportionment of Overhead Expenses: Definition Certain overhead expenses cannot be charged completely to a specific department or shop. Such expenses are apportioned in a suitable ratio over several departments or shops. Apportionment is the process of distributing overhead items to cost centers on a fair and reasonable basis. The principle is that if an overhead item cannot be fully allocated to…

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