BASES OF APPORTIONMENT Suitable bases have to be found out for apportioning the items of overhead cost to production &

service departments & then for reapportionment of service departments costs to other service & production departments. The basis adopted should be such by which the expenses being apportioned must be measurable by the basis adopted & there must be proper correlation between the expenses & the basis. So the common expenses have to be apportioned or distributed over the departments on some equitable basis. The process of distribution is usually known as primary distribution. The following are the main basis of overhead apportionment utilized in manufacturing concerns. 1. DIRECT ALLOCATION Overhead are directly allocated to various departments on the basis of expenses for each department respectively. Examples are overtime premium of workers engaged in a particular department, power, when separate meters are available, jobbing repairs etc. 2. DIRECT LABOUR HOURS The overhead expenses are distributed to various departments in the ratio of total number of labour hours worked in each department according to this basis. For example, administrative salaries & particularly salaries of the supervisors are apportioned on the basis of labour hours worked. This is so because time is an element of cost in these cases. 3. DIRECT WAGES According to this basis, expenses are distributed amongest the departments in the ratio of direct wage bills of the various departments. This method is used only for those items of expenses which are booked with the amount of wages e.g; workers insurance, their contribution to provident fund, workers compensation etc. 4. NUMBER OF WORKERS The total number of workers working in each department is taken as a basis for apportioning overhead expenses amongst departments. Where the expenditure depends more on the number of employees than on wage bill or number of canteen expenses, welfare & recreation expenses, time keeping, medical expenses etc. 5. RELATIVE AREAS OF DEPARTMENTS This basis is adopted for the apportionment of expenses like lighting & heating, rent, rates, taxes on building, air conditioning etc. 6. CAPITAL VALUES The capital value of certain assets like machinery & building are used as basis for the apportionment of certain expenses under this basis. Examples are rates, taxes, depreciation, insurance charges of the building etc.

7. LIGHT POINTS This is used for apportioning lighting expenses. 8. KILOWATT HOURS This basis is used for the apportionment of power expenses. 9. TECHNICAL ESTIMATES This basis of apportionment is used for the apportionment of these expenses for which it is difficult to find out any other basis of apportionment. An assessment of the equitable proportion is carried out by technical experts. This is used for distributing works manager salary, internal transport, steam water etc. When these are used for processes. On the basis of above, a table showing the various items of overhead cost & their basis of distribution is given as under: No. OVERHEAD COST 01. Canteen expenses, time-keeping, general welfare expenses, compensation & other fringe benefits & employees state Insurance, contribution of employer. 02. Depreciation of plants, machinery & equipments, fire insurance. 03. Electric light. 04. 05. 06. 07. 08. 09. 10. Electric power. Steam. Heating air-conditioning, rent, five precaution expenses. Delivery expenses. Tabulation. Audit fees. Transport service expenses. BASIS OF DISTRIBUTION Number of employees or wages for each department.

Capital values. No. of light points, floor space, hours used, no. of watts if separate meters are available. Horse power, horse power multiplied by hours, K.W.H. Passed on a consumption return or on potential consumption. Relative areas or volume of departments. Weight, volume, ton-mile. Hours used, number of cards punched etc. Sales or total cost. Crane hours, Truck hours, Truck mileage, Truck tonnage, Truck tone-hours, Tonnage handled, Number of package.

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