Cost which are not directly attribute to produce the producing a rendering the service are called indirect cost all the indirect expenses or collectively called overhead these are related to the cost object bees cannot be traised to in a economically feasible way example supervisor salary classification of overheads are production overhead factory overhead administrative selling and distribution and Research and Development study of overhead can be better understood from the following diagram it can be separated into 3 collection of portion mint absorption rented depreciation such other or similar nature will come under manufacturing and office expenses administration selling and distribution material labour expenses fixed variable semi variable or semi fixed method causes of over absorption methods of disposal of Under repetitive distribution simultaneous equation trial and error the important steps involved in overhead accounting collection and coding of overhead alocation opportunity and the reappointment indirect material indirect labour and expenses comes under classification according to Elements functional classification has 4 sub divisions manufacturing administrative selling and distribution research and development fixed variable semi variable comes under based on behaviour of classification it is said technique of intelligently describing a number of letters or a combination of both the lengthy description of numerous cost accounting head for each of recording and controlling of the cost data generated it facilities that ask of and over different department or cost centre and its reduce the task of maintaining accused number of the term allocation implies relating overhead directly to the various department expenses which cannot be directly allocated to the various department and cost centre and place allotment of preposition of items of cost to cost Centre or department it employees that the unlogable expenses are to be spread over the various department or cost centre on and equitable bases ability to pay survey or analysis method efficiency method to protection department is called a Re apartment recovery or observation charging of overhead cost a saver unit of output is called recovery percentage of direct material direct labour and Prime caused labour rate machine hour rate it means identifying a cost centre and a charging its expense in full specific cost or directly advocated to cost Centre nature of expensive specific and identify ablecation a lot whole amount of cost to cost the centre or cost Unit No bases required for our location charging of expenses to only one cost a Centre it means allotment of proportions of common cost to various cost a Centre which cannot be directly allocated on some suitable basis nature of expenses is general and common it allots part of cost to cost a centre is made is made on the basis of area Asset Value number of workers etc expensive surcharged in proportion this are the distinguish between allocation and abortionment absorption means recording of overhead in cost account on an estimated basis with the help of a predetermined rate which is computer that normal or average or maximum capacity treatment of Under absorption and of absorption is the expenses usually applied to production on the basis of tree determine the rate the actual rate will rally coinside with the pre determined rate due to variation