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R d overheads can be accumulated as follows a all

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R & D overheads can be accumulated as follows:-(a)All expenditure under the direct elements (direct material, labour and expenses)must be chargedto the work orders.(b)Expenses like supervisor salary, material handling charges, maintenance of equipments can bedirectly allocated to particular research work order.(c)Items of general overheads like depreciation of building, depreciation of maintenance equipment,share of purchase department expenses may be suitably apportioned to the research work order.Accounting of R&D OverheadsAccounting of Research & Development Cost arise due to the following causes:-(a)The expenditure is in the nature of pre-production costs and there is a considerable time lag betweenthe incidence and expenditure and realization of benefit.(b)There is no immediate production, or the production is so small that it becomes difficult to chargesuch costs to products.It is because of these difficulties that the accounting of Research and Development Costs has been asubject of some controversy. Three methods are available for charging Research and DevelopmentCosts as:(a)Charging off to the current year Profit & Loss Account(b)Capitalization so that cost may be amortized on a long term basis.(c)Deferment and charge-off to costs of the next two or three years-a short/medium term amortizationResearch and Development may be regarded as a function of production and the Research &Development Costs may be charged to costs to be recovered through the general overhead rates.There are many arguments for and against charging the Research & Development Costs in currentrevenue. The arguments in support of this method are as follows:-(a)All research & development expenses may not result in new processes or saleable products.(b)Some of the research & development projects may result in failures.(c)These expenses may be incurred simply to maintain the present competitive position of the concern.
THE INSTITUTE OF COST ACCOUNTANTS OF INDIA145Cost Ascertainment - Elements of Cost(d)It is difficult to assess the period over which the know-how or knowledge acquired may be spreadover.(e)It may be more advantageous to recover a substantial portion of the cost immediately, as the lifeof the new products are uncertain.(f)In certain cases, the effect of these research costs on future revenues may be doubtful.The classification used for cost collection is mostly combination of elemental and functional. Thebehavioural classification cannot be used for booking of costs; it is used only for analysis and decisionmaking.ElementsMaterialLabourExpenseFactory orproduction ormanufacturing orworks overheadsNuts & bolts,consumables,lubricants, weldingelectrodes, cleaningmaterials, nails,threads, ropes etc.

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