Which statement best describes apportionment of overheads?

Which statement best describes apportionment of overheads?

• A. It relates to a single production centre
• B. It is not allocated
• C. It relates to more than one production centre and is spread across applicable centres
• D. It is charged to finished goods only

Answer: (C)

Overheads are indirect costs that support several production centres, so they must be spread across those centres that benefit from them. Apportionment distributes these costs to all applicable centres in proportion to a chosen basis (like floor area, labour hours, or machine hours) to ensure each centre bears a fair share. This step is necessary because overheads aren’t tied to a single centre or to finished goods alone; they arise from facilities and activities that serve multiple areas, and later stages may absorb these apportioned costs into product costs. Choosing not to allocate, or allocating to only one centre or only to finished goods, would distort cost information and misrepresent resource use.

Overheads are indirect costs that support several production centres, so they must be spread across those centres that benefit from them. Apportionment distributes these costs to all applicable centres in proportion to a chosen basis (like floor area, labour hours, or machine hours) to ensure each centre bears a fair share. This step is necessary because overheads aren’t tied to a single centre or to finished goods alone; they arise from facilities and activities that serve multiple areas, and later stages may absorb these apportioned costs into product costs. Choosing not to allocate, or allocating to only one centre or only to finished goods, would distort cost information and misrepresent resource use.