Primary distribution of overheads refers to allocation and apportionment of overhead expenses among production and service departments of an organisation.
This process involves allocation of overheads which can be directly identified with a particular department and apportionment of common item of overheads on appropriate basis among all the departments.
The entire process of allocation and apportionment is systematically presented in a perform which is known as perform of overheads distribution summary or primary distribution summary. This performs is shown below for better understanding:
While preparing overheads distribution summary, it is important to note that the direct costs of the service departments should be considered as overheads. Hence the direct material, direct labour and direct expenses of the service departments are allocated directly and recorded in the overheads distribution summary since these are overheads from production point of view.
But the direct material, direct labour and direct expenses of the production departments need to be excluded from this summary since these are not overheads.