(a)

Overhead absorption involves the process of allocation, apportionment and absorption of the production overhead to the final products. You are required to explain the following terms used in overhead absorption method:

(i) Overhead allocation (3 marks)

(ii) Overhead apportionment (3 marks)

(iii) Overhead absorption. (3 marks)

(b)

Define and explain the following terms with relevant examples:

(i) Prime cost (4 marks)

(ii) Indirect cost (overhead) (4 marks)

(iii) Variable cost (4 marks)

(iv) Fixed cost (4 marks)

[Total:25 marks]