Non-manufacturing overheads
　　For external reporting, non-production overhead is regarded as period cost.
　　For internal reporting, sometimes total cost per unit of output may be required, and it is necessary to allocate non-manufacturing overhead to product.
　　Two possible methods of allocating such non-manufacturing overhead absorption rate, such as direct labour hours, direct machine hours and so on.
　　Method 1: choose the same basis for the manufacturing overhead absorption rate, such as direct labour hours, direct machine hours and so on
　　Method 2: allocate non-manufacturing overheads on the ability of the products to bear such costs.
　　Example question for the session:
　　1. Which of the following is correct when considering the allocation, apportionment and reapportionment of overheads in an absorption costing situation?
　　A. Only production related costs should be considered
　　B. Allocation is the situation where part of an overhead is assigned to a cost center
　　C. Costs may only be reapportioned from production centers to service centers
　　D. Any overheads assigned to a single department should be ignored.
　　Solution is A
　　Only production related costs should be considered when considering the allocation.
　　Apportionment and reapportionment of overhead in an absorption costing situation.
　　2. Factory overheads can be absorbed by which of the following methods?
　　（i）。 Direct labour hours
　?。╥i） Machine hours
　?。╥ii） As a percentage of prime cost
　?。╥v） $x per unit
　　A. （i）， （ii）， （iii） and （iv）
　　B. （i） and （ii） only
　　C. （i）， （ii） and （iii） only
　　D. （ii）， （iii） and （iv） only
　　Solution is A
　　All of the overhead absorption methods are suitable, depending on the circumstances.
　　Method 1 Direct labour hours, is suitable in a labour-intensive environment
　　Method 2 machine hours, is suitable in a machine-intensive environment.
　　Method 3 a percentage of prime costs, can be used if it is difficult to obtain the necessary information to use a time-based method.
　　Method 4, a rate per unit, is suitable if all cost units are identical.
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