Absorption of non production overheads in production cost, Cost Accounting

Absorption of Non Production Overheads in Production Cost

Product costs may be compiled for a range of purposes including

a) Stock valuation

b) Product pricing

c) Decision making

For stock valuation purposes International Accounting Standard No. (2) two define cost being such expenditure that has been incurred in the normal course of business in bringing the product or service to its recent situation and location. This expenditure must involve in addition to the cost of purchase those costs of conversion as are suitable to that location and situation. Costs of conversion involve production overheads and other overheads attributable in the specific circumstances of the business in bringing the product or service to its recent location and situation

For product pricing reasons, administration, distribution and selling overheads may be absorbed in a number of ways involving

a) Like a percentage of selling price

b) Like a percentage of full cost of production

c) Like a percentage of conversion costs

d) Like a rate per unit sold

For decision making reasons it is relevant also to identify that part of administration distribution and selling overhead costs are directly attributable to a particular product and that are avoidable if such product is discontinued.

Posted Date: 2/5/2013 7:41:11 AM | Location : United States







Related Discussions:- Absorption of non production overheads in production cost, Assignment Help, Ask Question on Absorption of non production overheads in production cost, Get Answer, Expert's Help, Absorption of non production overheads in production cost Discussions

Write discussion on Absorption of non production overheads in production cost
Your posts are moderated
Related Questions
As the Junior Bank Clerk of a business, one of your monthly tasks is to prepare the bank reconciliation statement. At the month ending 31 January 2012, the bank statement has be

Mr. Homer Simpson, President and Chief Executive Officer of Duff's Beer Making Supplies Inc. recently hired you as the new budget analyst for his company.  As your first duty, he h

What are the distinguishing characteristics of these types of stock- describe any one of them. What is the difference between par value, book value and market value of stock? Expla

The project (using the tools and techniques given in Chapters 3, 8, 10, 11, and 12 of the textbook) and its subsequent report are based on the complete economic analysis of a compa

Direct Material Usage Variance Refers to the difference among the actual quantity utilized and the standard quantity particular for the actual production, all valued at the st

Determine the Single Limiting Factor A company manufactures and sells three products as A, B and C. The unit cost and revenue structure for every product and its maximum forec

Cowboy Constructions employs a full-time driver and incurs costs for a vehicle to deliver paperwork between each of their building sites. Select Couriers has offered to carry out t

You are assisting the accountant on the preparation of the final accounts of a business with a year-end of 31 December. A trial balance has been drawn up and a suspense account ope

A product is manufactured by passing through three processes: A, B and C. In process C a by-product is also produced which is then transferred to process D where it is completed. F

Me ole cock spaniel plc. makes 3 products, details as follows:   Apples (£)       Pears (£)         Cockneys (£)   Selling price        60               80