Microlesson · 5-min read

Distribution Overheads

# Distribution Overheads

## Definition

Distribution OH refer to expenditures incurred for distribution of goods (getting the product to the customer).

## Key Rule

> Distribution OH are charged on the basis of NUMBER OF UNITS SOLD.

## Examples of Distribution OH

1. Salary of employees in the distribution department.

2. Depreciation and maintenance of vehicles used for distribution.

3. Freight outwards / Carriage outwards.

4. Warehouse rent for finished goods.

5. Secondary packaging cost.

## Important Note from the Chapter

Sometimes a question may club Selling & Distribution OH together — treat them jointly in such cases.

Worked example

### Example 1

Example: Salaries of distribution staff ₹40,000, vehicle depreciation ₹15,000, freight outwards ₹20,000.

Distribution OH = 40,000 + 15,000 + 20,000 = ₹75,000 (added to Cost of Sales).

Confusing freight inwards (Direct Material) with freight outwards (Distribution OH).
Charging Distribution OH on units produced rather than units sold.
Including primary packaging here — that belongs to Cost of Production. Only secondary packaging is in distribution.

Reference:

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