Administrative Overheads

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....erheads, for determination of the Cost of product or service, and the presentation and disclosure in cost statements. Objective 2. The objective of this standard is to bring uniformity and consistency in the principles and methods of determining the administrative overheads with reasonable accuracy. Scope 3. This standard should be applied to cost statements, which require classification, measurement, assignment, presentation and disclosure of administrative overheads including those requiring attestation. Definitions 4. The following terms are being used in this standard with the meaning specified. 1[4.1 Abnormal cost: An unusual or a typical cost whose occurrence is usually irregular and unexpected and/ or due to some abnormal situ....

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....g cash outlay, computed for any purpose.] 8[4.7 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 of capacity resulting from planned maintenance.] 9[4.8 Overheads: Overheads comprise of indirect materials, indirect employee costs and indirect expenses which are not directly identifiable or allocable to a cost object.] 5. Principles of Measurement 5.1 Administrative overheads shall be the aggregate of cost of resources consumed in activities relating to general management and administration of an organisation. It usually represents the cost of shared services, cost of infrastructure and general management cos....

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....nistrative cost. Example: Expense incurred in a situation of natural calamity. 5.7 Fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the administrative overheads. 5.8 Credits/ recoveries relating to the administrative overheads including those rendered without any consideration, material and quantifiable, shall be deducted to arrive at the net administrative overheads. 5.9 Any change in the cost accounting principles applied for the measurement of the administrative overheads should 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 c....