Overhead Costing Complete Chapter | Cost Accounting | Management Accounting | Chandan Poddar

In this Video We Will Discuss Overhead Costing in Cost and Management Accounting CA IPCC, CA Final, B.com, BBA, CS Executive, CMA Inter, SSC-CGL, UGC-NET all concepts, examples, and problems for all Commerce Courses at all Level

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Topic Covered:
Introduction to Overhead
Basis of Primary distribution
Secondary distribution
Secondary distribution Direct - Redistribution method
Secondary distribution Step method or Non-reciprocal Method
Reciprocal service method - Simultaneous equation method
Secondary distribution Trial and error method
Secondary distribution Repeated distribution method
What is Recovery Rate
Methods of overhead recovery
Overheads
Computation of machine hour rate Practice question
Two-tier machine hour rate with question
Machine hour rate Combined Question

Topic Covered:
00:00 Introduction to Overhead
13:31 Summary note of Overhead
17:15 Basis of Primary distribution
30:34 Secondary distribution
31:48 Direct - Redistribution method
40:35 Step method or Non-reciprocal Method
50:56 Reciprocal service method
53:49 Simultaneous equation method
1:11:06 Trial and error method
1:38:13 Repeated distribution method

Overhead Costing
The third important element of costs of any product or service is overheads. Overheads may be
manufacturing or non-manufacturing. Later we briefly discuss the classification of overheads. Before that let us see
what are overheads? Defining overheads particularly focuses on the concept of direct and indirect expenses which
in turn depends on the traceability of the expenses with the product or service. In other words, expenses that cannot
be directly traceable to any product or service are known as overheads. Simply, overheads are sum of all indirect
expenses i.e.
Overheads = Indirect materials+ Indirect labour + Indirect expenses
Classification of overheads: In general, overheads may be classified as
Overheads
Element wise Function wise Behaviour wise
a) Indirect material
i) Factory Overhead
ii) Variable overhead
b) Indirect labour
i) Office & Administrative
ii) Fixed overhead
c) Indirect expenses Overhead
i) Semi-variable overhead
ii) Selling & Distribution Overhead
Steps of Factory Overhead costing- Manufacturing overhead costing comprised of the following steps-
(i) Collection of factory overhead costs
(ii) Allocation of overhead costs
(iii) Apportionment or distribution of overhead costs
(iv) Re-distribution of service department cost to production department
(v) Absorption of overheads.
• Allocation and apportionment- allocation refers to identification of overhead costs to the cost centre.
But apportionment refers to the distribution of overhead cost on some logical base when identification to cost centre is not possible. A cost centre may be a person or location or an equipment or group of these in respect of which cost is ascertained for the purpose of cost control. It may be production cost centre or service cost centre
• Re-distribution of service department cost to production department
For re-distribution of service department cost to production department the following methods are used depending
upon the services rendered by the service department.
i) Direct service to production department only
ii) One-way service to production department and service department i.e besides giving service to

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