Administrative Overhead.

Q59. Write short notes on accounting and control of Administrative overhead.
Ans.
Accounting of Administrative Overhead:

  1.  Apportion between factory overhead and sales overhead by treating as a service department providing services to production and sales department.
  2. Charging to costing profit and loss account because these are not specifically related to any department and no suitable basis can be determined for apportionment.
  3. Treat administrative overhead as a separate function and taken as a separate charge to the cost of the job or product.

Control of Administrative Overhead:

  1. Comparison of actual result with past performance and taken out all variance of analysis.
  2. Setting up budgetary control system in the organization.
  3. Setting of standard for all types of expenses and comparison of actual result with such standard.

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