Overhead is the cost incurred in the course of making a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department.

Related MCQs

• Which of the following procedure is incorrect for attributing overhead costs to cost units? I. Collecting production overhead costs by item II. Establishing cost centres III. Allocating and apportioning overhead costs to cost centres IV. Apportioning service cost centre costs to production cost centres V. Absorbing production cost centre costs into cost units
• Variable overhead is overhead that increases as more production work is done. Total variable overhead expenditure therefore depends on the volume of production. Variable overhead is usually calculated as an amount for each direct labour hour worked.
• Apportionment means sharing on a reasonable basis. Many overhead costs are costs that cannot be allocated directly to one cost centre, because they are shared by two or more cost centres. These costs are apportioned between the cost centres.
• Allocation is where overheads are allocated to cost centres. If a cost centre is responsible for the entire cost of an item of expenditure, the entire cost is charged directly to the cost centre.
• Operating cost is the cost incurred for providing:
• When there is opening work in progress there are two types of cost on the debit side of the account. These are the costs that were incurred last period and brought forward as work in progress and the costs that were incurred in the current period.
• It is possible to add non-production overheads to the full production cost of units produced and sold (i.e. No cost will be carried forward to the next period in the form of closing stock), to obtain a full cost of sale.
• Overhead absorption is the process whereby overhead costs allocated and apportioned to production cost centres are added to unit, job or batch costs.
• It is possible to use a job costing system to control the costs of an internal service department, such as the maintenance department and the printing department.
• Which of the following cost is also known as overhead cost or on cost: