Allocation and apportionment of overheads
Some overheads belong to one department and some are shared. Learn when to allocate a cost whole and when to apportion it.
Task 1Overheads and cost centres4 questions
An overhead is a cost that cannot be traced to one product. Rent, heating and a supervisor's salary are overheads.
Fernhill Furniture makes tables in two departments, Cutting and Assembly. Each department is a cost centre: a part of the business that costs are collected for.
- Allocation
- charging the whole of a cost to one cost centre, because it belongs to that cost centre alone
- Apportionment
- sharing a cost between two or more cost centres, because they all use it
Task 2Sharing a cost fairly4 questions