{"id":718,"date":"2019-02-01T04:09:32","date_gmt":"2019-02-01T04:09:32","guid":{"rendered":"http:\/\/www.helpingstudents.com.ng\/?p=718"},"modified":"2019-12-16T21:12:49","modified_gmt":"2019-12-16T21:12:49","slug":"overhead-costs","status":"publish","type":"post","link":"https:\/\/hstutorial.com\/sv\/overhead-costs\/","title":{"rendered":"Overhead Costs Definition &#8211; What is Overhead Costs?"},"content":{"rendered":"<p>Overhead costs are those costs that cannot be traced directly to the level of activities of an organization. The overhead cost can be further described as \u201cthe cost of indirect materials, indirect labor, and indirect expenses\u201d.<\/p>\n<blockquote><p>Prenumerera p\u00e5 v\u00e5r YouTube-kanal f\u00f6r att inte missa n\u00e5gon instruktionsvideo.<\/p>\n<p><script src=\"https:\/\/apis.google.com\/js\/platform.js\"><\/script><\/p>\n<div class=\"g-ytsubscribe\" data-channelid=\"UCsHPKTWR8pDErG0onuksKSA\" data-layout=\"full\" data-count=\"default\"><span style=\"font-size: 16px;\">\u00a0<\/span><\/div>\n<\/blockquote>\n<h3>What are Indirect Costs?<\/h3>\n<p>Indirect costs are costs that are not directly accountable to a cost object (such as a particular project, facility, function or product). Indirect costs may be either fixed or variable. Indirect costs include administration, personnel and security costs.<\/p>\n<blockquote><p><em>Overhead costs\u00a0are considered\u00a0fixed costs, that is, they do not rise or fall directly with the\u00a0cost\u00a0of goods sold.\u00a0Overhead costs\u00a0are important to monitor and control.<\/em><\/p><\/blockquote>\n<h3>What are Direct Expenses?<\/h3>\n<p>Direct Expenses are expenses which are directly allocated to a job, service, cost centre, cost unit, or to a process.\u00a0 A direct expense\u00a0is an\u00a0expense\u00a0incurred that varies directly with changes in the volume of a cost object. A cost object is any item for which you are measuring\u00a0expenses, such as products, product lines, services, sales regions, employees, and customers.<\/p>\n<h3>What are the Overhead Expenses?<\/h3>\n<p>Overhead Expenses are expenses that cannot be allocated to service, job, etc\u2026 because they are charged to a different job, services, cost centers etc\u2026 they only go through apportionment and absorption.<\/p>\n<blockquote><p>Overheads are the expenditure which cannot be conveniently traced to or identified with any particular cost unit, unlike operating expenses such as raw material and labor.<\/p><\/blockquote>\n<h3>What are Expenses<\/h3>\n<p>An Expense is the amount of money spent in order to buy or do something.\u00a0In common usage, an expense or expenditure is an outflow of money to another person or group to pay for an item or service, or for a category of costs.<\/p>\n<p>For example; For a tenant, rent is an expense. For students or parents, tuition is an expense. Buying food, clothing, furniture or an automobile is often referred to as an expense. <span class=\"waslinkname\">Wikipedia<\/span><\/p>\n<h2>Types and Classification of Overhead Costs<\/h2>\n<ul>\n<li>Production overhead.<\/li>\n<li>Administrative overhead.<\/li>\n<li>\u00a0Selling and distribution overhead. (Marketing overhead).<\/li>\n<li>Research and development overhead.<\/li>\n<\/ul>\n<p>OVERHEAD COSTS can further be analyzed as either:<\/p>\n<ul>\n<li><strong>Variable Overhead:<\/strong> They are indirect costs that change along with the level of activities. (Unit of production)<\/li>\n<li><strong>Fixed Overhead:<\/strong> They are indirect costs that remain constant regardless of the level of activities. i.e they are costs that do not change\/will not change even when the level of activity is changing.<\/li>\n<\/ul>\n<blockquote><p><em>COST represents alternative forgone. i.e, the cost of having access to a particular thing. Cost can also be the value of the amount to be paid or spent in order to obtain a particular thing.<\/em><\/p><\/blockquote>\n<h3>Elements of Costs<\/h3>\n<p>The elements that constitute the cost of manufacture are known as the elements of cost. Such element of cost is divided into three categories. In a manufacturing concern, raw\u00a0materials\u00a0are converted into a finished product with the help of labor and other service units.\u00a0The elements of cost are;<\/p>\n<ul>\n<li>Material Cost<\/li>\n<li><a href=\"https:\/\/hstutorial.com\/sv\/labour-cost-classification-of-labour-cost\/\">Labour cost<\/a><\/li>\n<li>Expenses<\/li>\n<\/ul>\n<p>Each element of cost is categorized into two, namely; Direct Cost (it is been traced to a cost centre) and Indirect cost (It cannot be traced). These costs are derived as follows;<\/p>\n<ol>\n<li><strong>Material Cost:<\/strong> It is derived when the Direct Material Cost and Indirect Material Cost are summed up.<\/li>\n<li><strong>Labour Cost:<\/strong> It is derived when the Direct Labor Cost and Indirect Labor Cost are summed up.<\/li>\n<li><strong>Expenses<\/strong> are simply the summation of Direct Expenses and Indirect Expenses.<\/li>\n<\/ol>\n<blockquote><p><strong>Note that;<\/strong><\/p>\n<p>Variable cost changes at the level of production, while fixed cost does not change.<\/p><\/blockquote>\n<h4>Some Helpful Terminologies in Overhead Accounting<\/h4>\n<ul>\n<li><strong>Cost Centre:<\/strong> This is a location or department where cost is incurred or ascertain.<\/li>\n<li><strong>Cost Unit:<\/strong> This is an item that makes the cost to be incurred.<\/li>\n<li><strong>Direct Cost:<\/strong> This is a cost incurred that can be traced to a particular cost centre (location) or cost unit (an item). A direct cost will not require apportionment (sharing) since it can be traced to the cost centre where it is incurred.<\/li>\n<\/ul>\n<h4>DIRECT COST<\/h4>\n<p>Direct cost is the aggregate of direct material cost, direct labour cost, and direct expenses and it indicates that both direct cost and prime cost can be used interchangeably.<\/p>\n<h4>INDIRECT COST<\/h4>\n<p>This is a cost that cannot be traced to any cost centre or cost unit. It is a cost that will require apportionment since it cannot be traced to any cost centre or unit.<\/p>\n<blockquote><p>Indirect cost is the aggregate of indirect material cost, indirect labour cost, and indirect expenses. It means that indirect cost is the same as an overhead cost.<\/p><\/blockquote>\n<h2 style=\"text-align: left;\">Apportionment of Overhead Costs &#8211; Primary Method<\/h2>\n<p><strong>OVERHEAD COST ITEMS (1)<\/strong><\/p>\n<blockquote><p>Rent, Lighting and Heating, Rate, Repairs, Depreciation of building, Insurance of building, and any other relating to buildings.<\/p>\n<p><strong>BASIS OF APPORTIONMENT<\/strong> &#8211; Floor Area Occupied<\/p><\/blockquote>\n<p><strong>OVERHEAD COST ITEMS (2)<\/strong><\/p>\n<blockquote><p>Depreciation of fixed assets, Insurance of fixed assets, and any other cost relating to a fixed asset.<\/p>\n<p><strong>BASIS OF APPORTIONMENT<\/strong> &#8211; Netbook Value (NBV) of the Fixed Asset<\/p><\/blockquote>\n<p><strong>OVERHEAD COST ITEMS (3)<\/strong><\/p>\n<blockquote><p>Personnel cost, Canteen cost.<\/p>\n<p><strong>BASIS OF APPORTIONMENT<\/strong> &#8211; Number of Employees<\/p><\/blockquote>\n<p><strong>OVERHEAD COST ITEMS (4)<\/strong><\/p>\n<blockquote><p>Factory power, Heating.<\/p>\n<p><strong>BASIS OF APPORTIONMENT<\/strong> &#8211; Horsepower or Kilowatt<\/p><\/blockquote>\n<p><strong>OVERHEAD COST ITEMS (5)<\/strong><\/p>\n<blockquote><p>Material Handling.<\/p>\n<p><strong>BASIS OF APPORTIONMENT<\/strong> &#8211; The weight of the material<\/p><\/blockquote>\n<p><span style=\"color: #000000; font-family: inherit; font-size: 24px; font-weight: bold; letter-spacing: -0.02em;\">Video Guide on Apportionment of Overhead Costs.<\/span><\/p>\n<p>In this video, you\u2019re going to learn how to apportion these costs using the basis of apportionment in the table above<\/p>\n<div class=\"wonderplugin-video\" style=\"width:600px;height:400px;position:relative;display:block;background-color:#000;overflow:hidden;max-width:100%;margin:0 auto;\" data-aspectratio=\"1.5\"><iframe class=\"wpve-iframe\" width=\"100%\" height=\"100%\" src=\"https:\/\/www.youtube.com\/embed\/FcxpRuBoDlU\" frameborder=\"0\" allowfullscreen><\/iframe><\/div>","protected":false},"excerpt":{"rendered":"<p>Overhead costs are those costs that cannot be traced directly to the level of activities of an organization. The overhead cost can be further described as \u201cthe cost of indirect &hellip;<\/p>\n<p class=\"read-more\"> <a class=\"\" href=\"https:\/\/hstutorial.com\/sv\/overhead-costs\/\"> <span class=\"screen-reader-text\">Overhead Costs Definition &#8211; What is Overhead Costs?<\/span> L\u00e4s mer &raquo;<\/a><\/p>","protected":false},"author":2,"featured_media":3786,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-global-header-display":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"footnotes":""},"categories":[61],"tags":[217,149],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v21.5 (Yoast SEO v21.5) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Overhead Costs Definition - What is Overhead Costs? - HS Tutorial<\/title>\n<meta name=\"description\" content=\"Overhead Costs Overhead costs are those cost which cannot be traced directly to the level of activities of an organization. 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