CIMA BA2 · Chapter 3 · Question 1 of 8
What is the difference between overhead ALLOCATION and overhead APPORTIONMENT?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Allocation charges a whole overhead to a single cost centre, whereas apportionment shares an overhead between several cost centres on a fair basis
Explanation
An overhead is allocated when it can be identified wholly with one cost centre, for example the salary of a department's supervisor. A shared overhead, such as factory rent, is apportioned between the cost centres that benefit using a suitable basis such as floor area.
More Accounting for overheads MCQs
- Q3The overheads of the Maintenance service cost centre total $36,000. Maintenance work is used as follows: Production department P1 60%…
- Q4A factory has two production departments (P1 and P2) and two service departments (X and Y). Overheads allocated and apportioned so far are…
- Q5A production department is highly automated, and most of its overhead costs relate to running its machines. Which basis is most…
- Q6Budgeted production overheads were $450,000 and budgeted direct labour hours were 60,000. Overheads are absorbed on a labour hour basis…
- Q7A company absorbs production overheads at $12 per machine hour. During the period 28,000 machine hours were worked and overheads were…