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The Administrative Overheads is the expenses required to be incurred with the functions of Administrative Divisions. The Administrative Overhead of an organization is responsible for the formulation of the policies, giving directions to the organization and controlling the operations and expenses. The activities which are involved in Administrative Functions are activities of personnel manager, activities of board of directors and secretaries, activities of law officers, activities of auditors etc.Rents, rates and taxes paid for the Administrative building like furniture and equipments, expenses related to paying of salaries, transportation expenses, legal expenses, expenses incurred for stationary are the major Administrative Expenses.In standing order numbers, the collection of factory overhead is being done. Similarly, the collection of Administrative Overhead items are done in case of cost account numbers. Or, in simple terms; standing order numbers are used for the purpose of collecting factory overhead and cost account numbers are used for the purpose of collecting Administrative Overhead.
The problem faced in Administrative Overhead is explained by Administrative Over heads Assignment Help. First and foremost we need to tell the Administrative Overhead from the production and selling overheads and the reallocate them into production centers or responsibility centers.
The treatment in Administrative Overhead in cost accounts is given in details by Administrative Overheads Assignment HelP
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The treatment of Administrative Overhead in cost accounts is done in three different methods:-
- 1. First Method: –
In this method, Administrative Overhead are transferred to the profit and loss of the costing account. Assuming that the Administrative expenses are of fixed nature and relation cannot be determined between the Administrative functions on one hand and sales, productions and distribution functions on other hand, this transfer may be justified.
- 2. Second Method: –
Here, in this method, to the production, selling and distribution functions of the organization, the appointment of the Administrative expense is made. Here we have to assume that two functions are mainly present in every organization i.e. (i) production and (ii) sales and distribution.
The Administrative Overheads Assignment Help gives us an idea that all Administrative expenses that have been incurred during a period of time are debited to the Administrative Overhead account.
When the amount of any Administrative expenses is divided proportionally to the production overhead, the proportionate of such amounts is to be done again to the service department and to the production departments of the production functions.
- 3. Third Method: –
Here in this method, Administration is treated as a discrete function. In cost accounts, the treatment of Administrative expenses is done in the similar way as that of the expenses of other functions.
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