Q59. Write short notes on accounting and control of Administrative overhead.
Accounting of Administrative Overhead:
- Apportion between factory overhead and sales overhead by treating as a service department providing services to production and sales department.
- 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.
- 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:
- Comparison of actual result with past performance and taken out all variance of analysis.
- Setting up budgetary control system in the organization.
- Setting of standard for all types of expenses and comparison of actual result with such standard.