Production overheads represent indirect materials, indirect wages and indirect expenses attributable to:

Related MCQs

• . Production Overheads are costs related to the production process other than direct labour and materials. They are also known as factory overheads since they are incurred inside the factory, other overheads such as selling and administrative overheads are always charged to in the period in which they are incurred
• Indirect production costs are incurred in three main ways: • Production activities: costs arising in production departments such as fuel, depreciation, supervision • Service activities: the cost of operating non-producing departments such as materials handling, canteen • Establishment costs: general production overheads such as factory rent/rates, heating and lighting
• Indirect expenses are also known as overheads.
• Administration overheads and sales and distribution overheads are not absorbed into product costs. Instead, they are treated in full as an expense in the financial period to which they relate.
• Production overheads are the overhead costs of both the production departments and the service departments.
• 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.
• If the amount of production overheads absorbed into product costs is more than the actual production overhead expenditure, there is:
• Overheads can be absorbed into cost units by means of: • Physical unit produced • Percentage of prime cost • Percentage of direct wages • Direct labour hour rate • Machine hour rate
• Post separation costs are attributable to each ……. products.
• When overheads have been allocated and apportioned to production cost centres, they are charged to the cost of products manufactured in the cost centre.