COST ACCOUNTING
MANUFACTURING OVERHEAD
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Usually made by management based on past experience
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Overhead that incurred during production in a certain period of time
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The amount of overhead that is estimated before the production start
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Known as indirect manufacturing costs
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Detailed explanation-1: -Actual overhead is the amount of indirect factory costs that are actually incurred by a business. Examples of actual overhead are the salaries of production supervisors, depreciation on production equipment, and the upkeep of manufacturing facilities and equipment.
Detailed explanation-2: -If actual overhead incurred during an accounting period is greater than the amount of overhead applied to a job, this means overhead was underapplied to that particular job.
Detailed explanation-3: -If actual overhead incurred during a period exceeds applied overhead, the difference will be a credit balance in the Factory Overhead account at the end of the period. Job order costing is applicable to manufacturing firms only and not service firms.
Detailed explanation-4: -Answer. The difference between actual factory overhead and absorbed factory overhead will be usually at the minimum level, provided pre-determined overhead rate is based Absorption.