Hey,
I had a doubt in cost accountancy in the overhead chapter.
Why during allocation of overheads, we also allocate direct wages and direct material to service departments?
If they're direct shouldn't they be not involved in the computation of direct allocation of overheads?
Answer would be appreciated!
Thank you
Service dept. is a dept. which by itself does not generate any product. It aids production depts. to produce by offering timely maintenace activities of machines or providing utilities etc.Thus, they are indirect production cost centres. Direct wages of service dept. are direct to the service dept. But, as service dept. itself is indirect to the production activity, the method indicated by you is followed.
Thanks!
Thanks for the answer
CAclubindia
