COST ACCOUNTING
MANUFACTURING OVERHEAD
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which of the following is the first step in developing an Overhead Absorption Rate (OHAR)?
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Re-apportionment
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Apportionment
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Allocation
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Overhead Absorption Rate
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Explanation:
Detailed explanation-1: -The first step is termed as primary distribution and the second step is termed as secondary distribution of overheads. The base ( denominator) is selected on the basis of type of the cost centre and its contribution to the products or services, for example, machine hours, labour hours, quantity produced etc.
Detailed explanation-2: -To work out the overhead absorption rate using the production unit method, you need to divide the overhead cost by the number of units you’re going to produce (or expect to produce).
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