Overheads & Expenses

• Overheads are total indirect costs
• Businesses usually plan, or budget, their overheads in advance, often on an annual basis. By doing this they can work out how to recover the overheads through their output using an overhead absorption rate.
• Allocation of overheads is the charging to a particular responsibility centre of overheads that are incurred entirely by that centre.
• Apportionment of overheads is the sharing of overheads over a number of responsibility centres to which they relate. Each centre is charged with a proportion of the overhead cost.