Overheads are a very important part of cost accounting. Following is the Top Overheads Question Answer.
Overheads in Cost Accounting – Explained
1. What is meant by overheads?
The aggregate of indirect material cost, indirect wages, and indirect expenses is known as overhead.
2. What do you understand by fixed overhead?
Fixed overhead remains unchanged up to a fixed level of production and is related to the time factor rather than the production factor.
3. Explain variable overhead?
The cost which increases or decreases in proportion to production activities is known as variable overhead.
4. What is semi-variable overhead?
The overhead that does not increase or decrease in proportion to production activities is known as semi-variable overhead.
5. Examples of variable overheads?
Following are the variable overheads examples:
- Fuel and power
- Packing expenses
- Commission of traveling agents.
6. Difference between fixed and variable overhead?
- Fixed overhead remain fixed irrespective of changes in production while variable overhead varies in direct proportion to changes in production.
- Fixed overhead is related to time while variable overhead is related to production units.
7. What is meant by the functional specification of the indirect cost?
- Functional classification of overheads are:
- Factory or work overhead
- Office or administration overhead and
- Selling and distribution overhead.
8. Give 5 Examples of Factory Overhead?
- Factory rent, rates, and insurance.
- Factory lighting.
- Work manager salary.
- Depreciation of factory building.
- Drawing office salaries.
9. Give 5 examples of Office Overhead?
- Office rent, rates, and Taxes.
- Staff salaries.
- Printing and stationery.
- Postage and telephone charges.
- Depreciation of office building and furniture.
10. Give 5 examples of Distribution overhead?
- Packing expenses.
- Rent of Warehouse.
- Warehouse insurance.
- Delivery Van expenses.
- Salary of Watchman of the house.
11. What do you mean by the allocation of overhead?
It is the allotment of all items of cost to cost centers or cost units.
12. Explain the apportionment of overhead?
It refers to the allotment of the proportion of items to cost centers or cost units.
13. What do you understand by secondary appointment?
When the overhead of the service center is apportioned to the production center is known as secondary apportionment.
14. Difference between apportionment and absorption of factory overhead?
When the amount of factory overhead is related to a specific department is known as the allocation of expenses and if expenses are not specifically related to a particular department required apportionment in a judicial manner.
15. Difference between overhead and cost?