Importance of Overheads and Methods of Overheads (Accounting)
Overheads in accounting, as its name depicts is the term used to categorize the expense of a company which although does not directly falls under any head i.e. materials, labor or so on; yet these expense are very important for a company; hence they have to be considered. The meaning of overheads can be elaborated by an example; suppose there is a manufacturing company who needs to decide the value of its product so that a company earns profit. In this case if company only considers its direct expense and leave the other overhead expense then it will not able to price its products properly consequently it will not able to earn profit. There are various methods of calculating theses overheads. The companies choose the appropriate method for calculation of overhead depending upon their size or the kind of products they make. The various methods are; Job-order costing, process costing, activity based costing and variable costing.
Difficulties Faced by Students while solving of Overheads and Methods of Overheads - Accounting problems
Though the theoretical meaning of overheads is easy to understand but in terms of account it is complex matter. The calculation of overheads includes lot of methods and criteria. Even if one of the overhead expenses is left out it will alter the end result. The students need lot of knowledge and understanding to master the topic. They need someone experienced who can help them in clearing their concepts and solving their assignments.
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