PRODUCTION AND OPERATION OVERHEADS (REVISED 2015)

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....etermining the Production or Operation Overheads. 1.2 This standard deals with the principles and methods of classification, measurement and assignment of Production or Operation Overheads, for determination of the cost of goods produced or services provided and for the presentation and disclosure in cost statements. 2. Objective The objective of this standard is to bring uniformity and consistency in the principles and methods of determining the Production or Operation Overheads with reasonable accuracy. 3. Scope This standard shall be applied to cost statements, which require classification, measurement, assignment, presentation and disclosure of Production or Operation Overheads including those requiring attestation.....

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....roduct, project, service or any other object for which costs are ascertained. 4.6 Fixed costs: Fixed costs are costs which do not vary with the change in the volume of activity. Fixed indirect costs are termed fixed overheads. 4.7 Imputed Cost: Notional cost, not involving cash outlay, computed for any purpose. 4.8 Indirect Employee Cost: Employee cost, which cannot be directly attributed to a particular cost object. 4.9 Indirect Expenses: Expenses, which cannot be directly attributed to a particular cost object. 4.10 Indirect Material Cost: Material cost that cannot be directly attributed to a particular cost object. 4.11 Normal capacity: Normal capacity is the volume of production or s....

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....ions. Standard costs are used as scale of reference to compare the actual cost with the standard cost with a view to determine the variances, if any, and analyse the causes of variances and take proper measure to control them. Standard costs are also used for estimation. 4.14 Variable costs: Variable costs are the cost which tends to directly vary with the volume of activity. 5. Principles of Measurement: 5.1 Production or Operation 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. 5.2 Pr....

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.... or Operation Overheads, the balance recovery shall be treated as other income. 5.9 Any change in the cost accounting principles applied for the measurement of the Production or Operation Overheads shall be made only if, it is required by law or for compliance with the requirements of a cost accounting standard, or a change would result in a more appropriate preparation or presentation of cost statements of an entity. 6. Assignment 6.1 While assigning Production or Operation Overheads, traceability to a cost object in an economically feasible manner shall be the guiding principle. The cost which can be traced directly to a cost object shall be directly assigned. 6.2 Assignment of Production or Operation Overhea....

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....relating to resources received from or supplied to related parties^[2]. 4. Any Subsidy, Grant, Incentive or any amount of similar nature received or receivable reduced from Production or Operation Overheads. 5. Credits or recoveries relating to the Production or Operation Overheads. 6. Any abnormal cost not forming part of the Production or Operation Overheads. 7. Any unabsorbed Production or Operation Overheads. 8.2 Disclosures shall be made only where material, significant and quantifiable. 8.3 Disclosures shall be made in the body of the Cost Statement or as a foot note or as a separate schedule. 8.4 Any change in the cost accounting principles and methods applied for the mea....