Explain the following:
a.) Factory Overheads : are the overheads which are incurred from the stage of procurement of materials till the stage of finished goods. They include:
- Indirect Materials such as lubricants, cotton waste, consumable stores etc.
- Indirect Labour such as storekeeper, time keeper, works manager’s salary etc.
- Indirect Expenses such as cost of factory lighting, carriage inward cost, depreciation on factory building, rent/insurance of building/machinery etc.
b.) Office and Admin overheads : are the overheads incurred for the overall administrative work of the organisation. They include:
- Indirect Materials such as office supplies, stationery and printing items, brooms etc.
- Indirect Labour such as salaries payable to manager, clerk etc.
- Indirect Expenses such as lighting, bank charges, legal/audit charges, rent/insurance of office.
c.) Selling and Distribution Overheads : are the overheads incurred from the stage of final manufacturing of finished goods till the stage of goods sold in the market and collection of dues from the customers. They include:
- Indirect Materials such as samples, packing materials, etc.
- Indirect Labour such as salaries and commission payable to sales manager, salesmen etc.
- Indirect Expenses such as rent, carriage outwards, warehouse charges, discount offered to customers, advertising expenses, bad debts etc