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OVERHEADS (Revised 2011)]

CAS - 03 - Rule - Companies Law - CAS - 03 - 1[CAS - 3 (Revised 2011)] COST ACCOUNTING STANDARD ON "OVERHEADS" (Revised 2011)] The following is the revised COST ACCOUNTING STANDARD 3 (CAS-3) issued by the Council of The Institute of Cost Accountants of India on "Overheads". In this Standard, the standard portions have been set in bold italic type. This standard shall be read in the context of the background material, which has been set in normal type. 1. Introduction 1.1 This .....

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all be applied to cost statements, which require classification, measurement, assignment, presentation and disclosure of Overheads including those requiring attestation. 4. Definitions: The following terms are being used in this standard with the meaning specified. 2[4.1 Abnormal cost: An unusual or atypical cost whose occurrence is usually irregular and unexpected and/or due to some abnormal situation of the production or operation.] 4.2 Absorption of overheads: Absorption of overheads is charg .....

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s an organisational unit, in relation to which costs are accumulated. A cost centre includes a process, function, activity, location, item of equipment, group of persons or any other unit in relation to which cost are accumulated. 4[4.5 Cost Object: This includes a product, service, cost centre, activity, sub-activity, project, contract, customer or distribution channel or any other unit in relation to which cost are ascertained.] 5[4.6 Distribution Overheads: Distribution overheads, also known .....

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mputed for any purpose.] 7[4.8 Indirect Employee Cost: The employee cost, which cannot be directly attributed to a particular cost object.] 8[4.9 Indirect Expenses: Expenses, which cannot be directly attributed to a particular cost object.] 9[4.10 Indirect Material Cost: Materials, the cost of which cannot be directly attributed to a particular cost object.] 10[4.11 Marketing Overheads: Marketing Overheads comprises selling overheads and distribution overheads.] 11[4.12 Normal capacity: Normal C .....

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d. For example: • Production Overheads • Administrative Overheads • Marketing Overheads In addition Overheads shall also be classified on the basis of behaviour such as variable overheads, semi-variable overheads and fixed overheads. • Variable overheads comprise of expenses which vary in proportion to the change of volume of production. For example, cost of utilities etc. • Semi-variable overheads are partly affected by change in the production volume. They are further .....

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tion cost relating to production, factory, works or manufacturing. 13[4.15 Selling Overheads: Selling Overheads, also known as Selling Costs, are the expenses related to sale of products and include all Indirect Expenses in sales management for the organization.] 4.16 Standard Cost: A predetermined cost of resource inputs for the cost object computed with reference to set of technical specifications and efficient operating conditions. 14[Standard costs are used as scale of reference to compare t .....

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credited. 5.2 Overheads other than those referred to in paragraph 5.1 shall be determined on the basis of cost incurred in connection therewith. For example machinery spare fabricated internally or a repair job carried out internally will include cost incurred on material, employees and expenses. 5.3 Any abnormal cost where it is material and quantifiable shall not form part of the overheads. 5.4 Finance costs incurred in connection with procured or self generated resources referred to in parag .....

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ies, damages and similar levies paid to statutory authorities or other third parties shall not form part of the overheads. 5.9 Credits/recoveries relating to the overheads, material and quantifiable, shall be deducted from the total overhead to arrive at the net overheads. Where the recovery exceeds the total overheads, the balance recovery shall be treated as other income. 5.10 Any change in the cost accounting principles applied for the measurement of the overheads shall be made only if, it is .....

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following two principles; (i) Cause and Effect - Cause is the process or operation or activity and effect is the incurrence of cost. (ii) Benefits received - overheads are to be apportioned to the various cost objects in proportion to the benefits received by them. In case of facilities created on a standby or ready to serve basis, the cost shall be assigned on the basis of expected benefits instead of actual. 6.3 Absorption of Production Overheads shall be as follows: 6.3.1 The variable produc .....

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t or service shall be assigned to the products or services on the most appropriate basis. 7. Presentation 7.1 Overheads shall be presented as separate cost heads like production, administration and marketing. 7.2 Element wise and behaviour wise details of the overheads shall be presented, if material. 7.3 Any under-absorption or over-absorption of overheads shall be presented in the reconciliation statement. 8. Disclosures 8.1 The cost statements shall disclose the following: 1. The basis of ass .....

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