AAT Level 3 - CSTR - Overheads fully solved graded A+ 2023/2024

AAT Level 3 - CSTR - Overheads3 categories of indirect costs - correct answer 1. Indirect materials 2. Indirect labour 3. Indirect expenses Production overheads - correct answer 1. Included in the total production cost of a product - e.g. rent, rates, insurance, light, heat, running costs Types of non-production overheads: - correct answer 1. Administrative costs 2. Selling and distribution costs 3. Finance costs 4. Legal and professional charges Allocation, apportionment and absorption: - correct answer 1. Attributes overhead costs to production cost centres 2. Absorption is to include the production overheads of a cost centre in the costs of the units produced by the cost centre 3. Allocation is when an overhead relates entirely to one production or service centre and can be wholly attributed to that service centre 4. Apportionment is when an overhead relates to more than one production or service centre and is shared over these on a suitable basis 3 Steps of re-allocation of overheads - correct answer 1. Overheads are allocated or apportioned to cost centres using suitable bases 2. Any service centre costs are reapportioned to production centres using suitable bases 3. Overheads are absorbed into units of production again using suitable bases Absorption Costing - correct answer 1. Values each unit of inventory at the total cost incurred to produce the unit