CHAPTER ONE

Introduction

1.1       Background To The Study

Every manufacturing organization in ars costs in the production of goods and rendering of services. Some of such costs cannot be directly traced to a particular cost centre or cost unit e.g salary of security quads, salaries of executives, depreciation of plants, rent and rate, office stationary and so on.

At this point, it is worthwhile defining the overhead experiences.

OVERHEAD EXPENSES: According to Odetayo T.A. (1998) overhead expenses is total cost of indirect materials. Indirect labour and indirect expenses. Overhead is the totality of all those costs that cannot be traced to a specific job or product.

The overhead costs as part of the cost of finished products need to be analyzed in order to get them absorbed into all costs of production. As the production advances, there is need to control the overhead expenses in order to minimize cost of production.

A case study approach is used and our focus is in a manufacturing firm Ola Oluwa Aina Wire Industry Limited Osogbo.

Ola-Oluwa Aina Wire Industry Limited is a manufacturing Industry and it has a way of analyzing the overhead expenses incurred. The method of analysis is ABSORPTION METHOD the method ensures that overheads incurred are absorbed property and accounted for.

Control statements are prepared so as to ensure proper accounting for the overheads. This is to safeguard unnecessary increment of overhead. This in other words is to control their expenses and thus maximize their profit.