TaxTMI 
TaxTMI 
TaxTMI 
OVERHEADS (Revised 2011)]
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....nment of Overheads, for determination of the cost of product or service, 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 Overheads with reasonable accuracy. 3. Scope This standard shall be applied to cost statements, which require classification, measurement, assignment, presentation and disclosure of Overheads including those requiring attestation. 4. Definitions: The following terms are being used in this standard with the meaning specified. 2[4.1 Abnormal cost: An unusual or atypical cost whose occurrence is usually irregular and unexpected and/or due to some abnormal situation of the prod....
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.... Point. 6[4.7 Imputed Cost: Hypothetical or notional cost, not involving cash outlay, computed for any purpose.] 7[4.8 Indirect Employee Cost: The employee cost, which cannot be directly attributed to a particular cost object.] 8[4.9 Indirect Expenses: Expenses, which cannot be directly attributed to a particular cost object.] 9[4.10 Indirect Material Cost: Materials, the cost of which cannot be directly attributed to a particular cost object.] 10[4.11 Marketing Overheads: Marketing Overheads comprises selling overheads and distribution overheads.] 11[4.12 Normal capacity: Normal Capacity is the production achieved or achievable on an average over a number of periods or seasons under normal circumstances taking into account the loss o....
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....e the expenses related to sale of products and include all Indirect Expenses in sales management for the organization.] 4.16 Standard Cost: A predetermined cost of resource inputs for the cost object computed with reference to set of technical specifications and efficient operating conditions. 14[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.] 5. Principles of Measurement: 5.1 Overheads representing procurement of resources shall be determined at invoice or agreed price including duties and taxes, and other expenditure di....
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....10 Any change in the cost accounting principles applied for the measurement of the 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 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 overheads to the cost objects shall be based on either of the following two principles; (i) Cause and Effect - Cause is the process or operation or activity and effect is the incurrence ....
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....ng to resources received from or supplied to related parties]. 4. Any Subsidy/Grant/Incentive or any amount of similar nature received/receivable reduced from overheads. 5. Credits/recoveries relating to the overheads. 6. Any abnormal cost not forming part of the overheads. 7. Any unabsorbed 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 measurement and assignment of the overheads during the period covered by the cost statement which has a material effect on the overheads shall be disclosed. Where the effec....