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, repairsFloor Area
2. LightingNumber of light points, area occupied.
3. HeatCubic Content
4. PowerHouse 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 officeNumber of employees or Wages paid.
8. StoresNo. of stores requisitions or value of material issued or value of material stored.
9. Delivery expensesWeight, Volume, tone-miles
10. Carriage inwardsValue of material used.
11. Audit feedsSales, total cost.
12. Selling and distribution expensesSales value
13. MaintenanceMaintenance hours, maintenance wages or plant value
14. InspectionNo. of production employees or No.of jobs or No.of inspection tickets.
15. AdvertisingSales value
16. Remuneration of Works DirectorDirect labour hours or wages paid or number of employees.
17. SundriesDirect Wages

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