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    Control of Administrative, Selling and Distribution Overhead

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    Bhavik Ambani
    This document discusses various types of administrative, selling, and distribution overheads. It defines administrative overheads as costs for planning, management, and control of an organization. Selling overheads include costs of selling to existing customers like advertising, promotion, collections. Distribution overheads are costs associated with transporting goods. The document provides examples of cost accounting methods like analyzing costs by nature, function, or product to control and allocate overheads. It also gives formulas to calculate overhead recovery rates and amounts charged to products based on sales or units.

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    Control of Administrative, Selling and Distribution Overhead

    Uploaded by

    Bhavik Ambani
    3K views17 pages
    This document discusses various types of administrative, selling, and distribution overheads. It defines administrative overheads as costs for planning, management, and control of an organization. Selling overheads include costs of selling to existing customers like advertising, promotion, collections. Distribution overheads are costs associated with transporting goods. The document provides examples of cost accounting methods like analyzing costs by nature, function, or product to control and allocate overheads. It also gives formulas to calculate overhead recovery rates and amounts charged to products based on sales or units.

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    This document discusses various types of administrative, selling, and distribution overheads. It defines administrative overheads as costs for planning, management, and control of an organization. Selling overheads include costs of selling to existing customers like advertising, promotion, collections. Distribution overheads are costs associated with transporting goods. The document provides examples of cost accounting methods like analyzing costs by nature, function, or product to control and allocate overheads. It also gives formulas to calculate overhead recovery rates and amounts charged to products based on sales or units.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    3K views17 pages

    Control of Administrative, Selling and Distribution Overhead

    Uploaded by

    Bhavik Ambani
    This document discusses various types of administrative, selling, and distribution overheads. It defines administrative overheads as costs for planning, management, and control of an organization. Selling overheads include costs of selling to existing customers like advertising, promotion, collections. Distribution overheads are costs associated with transporting goods. The document provides examples of cost accounting methods like analyzing costs by nature, function, or product to control and allocate overheads. It also gives formulas to calculate overhead recovery rates and amounts charged to products based on sales or units.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 17

    Control of Administrative, Selling and Distribution Overhead

    - Bhavik Ambani -Prateek Jain -Suman Kothari -Swati Singh -Rahul Agarwal -Bhupesh Uppal

    Administrative Overheads
    Administrative Overhead are incurred for planning, general management and control of an organization Depending on the organizational structure two types of administrative costs are incurred in an organization are:
    - Within the Factory. - Centrally in the Head office.

    Administrative Overhead Includes


    Indirect Material

    Indirect Labor
    Indirect Expenses

    Departments
    Accounts Departments

    Factory Estate Department


    General office Department Legal Department Personnel Department Secretarial Department

    Accounting Methods
    Transfer to Costing Profit and loss A/c.

    Apportionment to Manufacturing, Selling and

    distribution Division Addition as a separate item of Cost

    Control of Administrative Overhead


    It relates to a general and a financial management of an organization their major portion represent policy cost that are mostly fixed in nature therefore, largely non-Controllable.

    Methods of Controlling Cost


    Comparison with past performance

    Budget control
    Standard Costing

    Selling Overhead
    Selling overheads includes the costs incurred in selling to existing customers. They consist of following Items Direct Selling Cost Advertisement and Sales promotion Credit and collection costs Financial and general administrative costs

    Accounting for selling and distribution


    It Involves 3 stages analysis Analysis by Nature/Object - such cost items nature wise includes 1. Advertising 2. Remuneration 3. Custom Excise Duty 4. Deprecation 5. Freight 6. Heating Etc.

    Accounting for selling and distribution


    By Function analysis
    Expenses Item Advertising
    Credit Control Depreciation Insurance Rent Warehousing Transportation

    Bases Sales value / Physical Unit


    Number of orders Value of assets Property value Floor Space Sales Volume Weight

    By product/Cost Units.

    Question :following data of ABC ltd. for a certain month


    Territory 1(Rs) Territory 2(Rs) Territory 3(Rs)

    Selling expenses
    Distribution cost No. of units sold Sales

    7600
    4000 16000 76000

    4200
    1800 6000 28000

    6240
    2000 10000 52000

    The company adopt sales basis and quality basis for application of selling & distribution cost respectively a) The territory wise overhead recovers rates separately for selling & distribution cost b) The amount of selling and distribution cost chargeable to a consignment of 2000 units of a product sold in each territory at Rs 4.5 p.u.

    Solution
    a)

    Statement showing determination of overheads recovery rates for selling & distribution cost
    Selling cost recovery rate = (selling exp / sales) * 100

    Territory 1 Rs (7600/76000)*100=10% of sales Territory 2 Rs (4200/28000)*100=15% of sales Territory 3 Rs (6240/52000)*100=12% of sales Distribution cost recovery rate per unit sold = (distribution cost / no. of units sold ) Territory 1 (Rs4000/16000units) = Rs 0.25 p.u. sold Territory 2 (Rs1800/6000units) = Rs 0.30 p.u. sold

    Statement showing determination of selling & distribution costs charged to consignment of 2000 units Territory 1 Territory 2 Particulars Territory 3
    b.
    No. Of units sold Sales revenue Selling cost Distribution cost Total cost 2000 Rs. 9000 900 500 1400 2000 Rs.9000 1350 600 1950 2000 Rs. 9000 1080 400 1480

    Control of Selling and Distribution Overhead


    Selling and distribution and not directly related to products they are indirect components of sales which incur cost. The problem associate with the control are: Customers/Competitors. Direct supervision over staff/representatives. Fixation of a market price. Difficulty in obtaining data. Fixation of market price without reference to cost of production.

    Techniques of Control of Selling and distribution Overhead


    Sales Analysis
    o o o o

    Salesmen wise Sales territory Product line wise Customer wise

    Budgets
    Standard Costing

    Absorption of Selling Overhead


    Rate per Unit

    Absorption Rate per Unit =


    Percentage of sales

    Absorption percentage on Sales =


    X 100

    Percentage on a Work Cost

    Absorption percentage of work cost


    =

    X 100

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