The cost of each order produced

The cost of each order produced for a customer or he cost of each lot to be placed in stock is recorded on a job order cost sheet. Each cost sheet is designed to collect the direct and indirect cost charged to a specific job, and each has a job number which is entered on all documents relating to the job e. g. materials issued, labor hours worked, overhead items charged etc. the indirect factory cost (overheads) charged to a job are usually estimates rather than the actual costs incurred. Estimated overheads charged = OAR ?

Methods of apportioning indirect costs

Indirect costs are those costs which are not easily traced to the final product. Such costs tend to be so general such that they are attributable to the firm as a whole rather than the particular products. They are also known as overheads, and examples include; factory rent, depreciation of equipment, heating costs for the factory, and factory lighting costs. Because of the complexity in directly identifying such costs to a particular cost unit or cost center, methods have been devised to help account for these overheads, by sharing them out between units of production through some costing systems.