(a) Prcpet records shall be maintained for various items of indirect expenses comprising overheads pertaining to goods or services under reference. These expenses shall be analysed, classified and grouped according to functions.
(b) Overheads representing procurement of resources shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of discounts (other than cash discounts), taxes and duties refundable or to be credited.
(c.) Overheads other than those referred to above shall be determined on the basis of cost incuned in connection therewith.
(d) Any abnormal cost where it is material and quantifiable shall not form part of the overheads.
(e) Finance costs incurred in connection with procured or self-generated resources shall not form oart of overheads.
(D Overheads shall not include imputed cost.
(g) Overhead variances attributable to normal reasons shall be treated as part of overheads. Overhead variances attributable to abnormal reasons shall be excluded from overheads.
(h) Subsidy or grant or incentive and any such payment received or receivable with respect to overheads shall be reduced from cost of the cost object in the financial year when such subsidy or grant or incentive and any such payment is recognised as income.
(y' Fines, penalties, damages and similar levies paid to statutory authorities or other third oarties shall not form oart of the overheads.
(1) Credits or recoveries relating to the overheads, material and quantifiable, shall be deducted from the total overhead to arrive at the net overheads. Where the recovery exceeds the total overheads, the balance recovery shall be treated as other income.
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(k) Any change in the cost accounting principles applied for the measurement of the overheads shall be maoe only lt, it is requireO by law or a change would result in a more appropriate preparation or presentation of cost statements of an entity' , (/) While assigning overheads, traceability to a cost obiecl in an economically feasible ' ' t"nn"|. sn-att fl the guiding principle' The cost which can be traced directly to a cost object shall be directly assigned'
(m) Overheads shall be classified according to func-tions' v2'' works' administration' selling and distribution, head office, corporate etc'
(n) Assignment of overheads to the cost objects -shall be based on either of the ' '' iorroiling two principles: (1) Cause and Effecl - cause is the process or operation oi activi-ty ano eftbct is ihe incunence of cost and (2) Benefits received, - overheads are to be apportioned to the various cost objects in proportion to the benefits received bY them.
/o)Thevariab|eproductionoverheadssha||beabsorbedtoproductsorservices' based on actual capacity utilisation.
(p)Thefixedproductionoverheadssha||beabsorbedbasedonthenorma|capacity.
(g) Assignment of administration overheads shall be in accordance with paragrapn number 8.
(r) Marketing overheads that can. be identified to a product or service shall be assigned to that product or servlce'
(s) Marketing overheads that cannot be identified to a product.or service shall be '-' issigned-to the products or services on the most appropriate basis'