Non Reciprocal Factory Overhead Distribution

Описание: Non-reciprocal distribution of overhead costs is a method of allocating indirect costs to different products, services, or departments without taking into account the specific activities that generate those costs. This approach assumes that all overhead costs are incurred for the benefit of the entire organization, and therefore should be allocated based on some predetermined factors such as sales revenue, production volume, or number of employees.

For example, a company that produces multiple products may allocate its overhead costs to each product based on its relative sales revenue. If Product A generates 50% of the company's total sales revenue, it would be allocated 50% of the total overhead costs. This method is non-reciprocal because it does not attempt to trace each cost back to the specific activity or department that caused it.

While non-reciprocal distribution of overhead costs may be simpler and more convenient than other methods, it may not accurately reflect the actual costs of each product or service. This is because some products or services may require more indirect costs than others, but may not necessarily generate more sales revenue or production volume. As a result, this method may lead to distorted cost information, which can affect decision-making and profitability analysis.

A Solved Numerical of Non Reciprocal Overhead Distribution, with the Calculation of Factory Overhead Rates for Production Departments.

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00:00 Welcome and Introduction
00:36 Numerical
01:20 Proforma of Overhead Distribution Sheet
01:37 Primary Distribution
03:56 Secondary Non Receprocal Distribution
07:59 Calculation of Departmental Cost
08:18 Calculation of Overhead Rates