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Overheads

Costing

In this question 6, they have allocated the general expense based on direct wages. What is the reason?

vs navin

CA Inter

★ 1K+

28-Jun-22 17:50

202

Answers (2)

Factory overhead costs / general expenses are routinely allocated to products based on the number of direct labor hours or direct wages related to the production. Usually such expenses are linked to direct wages as that is the best relatable expense

Sudha Reddy

CA Final

★ 20K+

29-Jun-22 08:53

Actually general exps/ factory overheads are recovered/absorbed based on Direct material cost/Direct wage cost/labour hours Because recovery of over heads means recovering the indirect expenses by charging them on Direct costs