Overhead cost sharing;

Overhead cost sharing;

The indirect costs of the factory may be related to a certain circle or related to all the circles. Since the production of the product is done in the production circles, it is possible to calculate the cost of the manufactured products by adding the overhead costs to the account of the production circles. will be accepted

Construction costs are divided into two ways, which are: direct distribution and distribution based on appropriate bases.

A- Direct distribution:

The meaning of direct sharing of overhead costs is to divide the costs that are exclusively related to a cost center, either the production circle or the support circle, and are consumed in that circle.

Some of these costs include: the cost of wages for non-production workers in the weaving circle, the cost of fuel and lighting for the restaurant, or the factory repair circle, which are both support circles.

B – Distribution based on appropriate bases:

Cost sharing using the basis includes all costs that are shared in different departments of the factory, including production and support departments. Such costs are called general factory costs. In this case, public expenses should be distributed based on appropriate bases between the departments that contributed to their creation.

Some of these costs include: the cost of depreciation of the building and factory facilities, the cost of factory renovation fees, and the cost of electricity and central heating of the factory. Before allocating general factory costs to production and support departments, the appropriate basis must be identified and selected.

It is not easy to choose a suitable basis for sharing the general costs of a factory to the departments that use these costs, and it depends to some extent on the conditions of the production unit and on the cost accounting system.
Mehdi Koh Soltani (financial services, accounting, financial and tax consultant):
Group of accountants, auditors, Tabriz
https://t.me/joinchat/BnzBsTuioTshiXBwf9bBPQ

This post is written by Mahdi_kohsoltani