Introduction to Comments on Certain Items of Factory Overheads
There are mainly four types of factory items:
1. Depreciation of plant and machinery
Depreciation implies decrease in the value of an asset since lapse of time, wear and tear and another contributory causes. In order to view the accurate cost of manufacture of an article the charge for depreciation may be takes into the cost accounts. It will be good to conserve a separate Plant and Machinery Register in order to protect a larger correctness in calculate the amount of reduction and giving thorough particulars about each one machine at one place.
2. Provision for obsolescence
In case provision for obsolescence has been made since it is estimated that probably the commercial life of the machinery or plant is less than what has been approximate for ascertaining annual depreciation, such type of provision is such as additional depreciation and, so, should be involved in the factory overheads.
3. Cost of defective work
In which defective work is acquired in connection with a particular job, the cost of defective work should be charged straight to that job. If not, the cost of normal defective work be •treated as a works overhead expense.
4. Idle facilities
The word "facilities" means plant, services and machines. So, the meaning of idle facilities is idle plant, machines or services.
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