Overhead allocation and absorption

Overhead allocation and absorption

Bachelor of Business Studies (BBS) — Second Year

Subject: Cost and Management Accounting (MGT 212)

Unit 4: Accounting for Overhead Cost

Academic Year: 2083/84

Topic Objectives

After studying this topic, students should be able to:

• Explain the scope and key elements of overhead allocation and absorption.
• Prepare the relevant cost records or calculations and interpret their use in managerial planning and control.

Curriculum Scope

• Meaning and importance of allocation, apportionment and absorption
• Volume basis
• Direct-labour-hour basis
• Machine-hour basis

Detailed Microsyllabus

1. Allocation and apportionment

   1. Assign identifiable overhead to a cost center.
   2. Share common costs using a justified basis.
   3. Distinguish primary assignment from absorption into output.

2. Absorption rates

   1. Volume-based rates.
   2. Direct-labor-hour and machine-hour rates.
   3. Apply rates consistently and interpret resulting overhead charges.

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Curriculum reference: Tribhuvan University, Faculty of Management, revised four-year BBS curriculum, PDF pages 31-34.

Source note: The curriculum scope above is retained from the existing TU syllabus breakdown. The numbered study subtopics are editorial elaborations for teaching and study, rather than a separately issued TU syllabus. Unit or component allocations apply at their stated level; no separate topic hours or marks are assigned here.