Primary Distribution of Overhead | Meaning | Bases

Primary Distribution of Overhead

Primary Distribution is the allocation or appointment of different items of overhead to both production and service departments on suitable basis. There is no partiality between production and service department in making primary distribution.

The following points should be kept in mind in the case of primary distribution.

1. The basis for allocation and apportionment should be equitable and practicable.

2. Charges are to be made to different departments in relation to benefits received.

3. The method and basis for allocation and apportionment should not be time consuming and costly.

Bases for Primary Distribution of Overheads

The following bases are commonly used by many organizations for distribution of overhead.

Types of Overhead Basis for Apportionment
1. Rent, rates and taxes, depreciation of building, heating, repairs Floor Area
2. Lighting Number of light points, area occupied.
3. Heat Cubic Content
4. Power House power of machines or machine hours.
5. Electric power, electric light Kilowatt-hours.
6. Depreciation, insurance, repairs, and maintenance of plant and vehicles Book value of asset or original cost.
7. Group insurance, Canteen expenses, E.S.I. contribution, Supervision, Personnel, Staff welfare, Wages, Cost office Number of employees or Wages paid.
8. Stores No. of stores requisitions or value of material issued or value of material stored.
9. Delivery expenses Weight, Volume, tone-miles
10. Carriage inwards Value of material used.
11. Audit feeds Sales, total cost.
12. Selling and distribution expenses Sales value
13. Maintenance Maintenance hours, maintenance wages or plant value
14. Inspection No. of production employees or No.of jobs or No.of inspection tickets.
15. Advertising Sales value
16. Remuneration of Works Director Direct labour hours or wages paid or number of employees.
17. Sundries Direct Wages

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