COST ACCOUNTING
MANUFACTURING OVERHEAD
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The amount of overhead that estimated before the production start as the actual overhead are still unknown
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The amount of overhead there will be over or under
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Estimated overhead based on actual activity level
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Also known as indirect manufacturing cost
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Detailed explanation-1: -Overhead Budget is prepared to forecast and present all the expected costs concerning manufacturing the goods that the company expects to incur in the next year. It excludes the direct material and the direct labor cost, and the information, which becomes part of the cost of the goods sold in the master budget.
Detailed explanation-2: -A predetermined overhead rate is calculated at the start of the accounting period by dividing the estimated manufacturing overhead by the estimated activity base. The predetermined overhead rate is then applied to production to facilitate determining a standard cost for a product.
Detailed explanation-3: -Overhead costs are those that are not directly related to the production of goods or services, but are necessary for the operation of a business. Examples of overhead costs include rent, utilities, insurance, legal fees, office supplies, advertising, payroll, and accounting fees.
Detailed explanation-4: -To compute the overhead rate, divide your monthly overhead costs by your total monthly sales and multiply it by 100. For example, if your company has $80, 000 in monthly manufacturing overhead and $500, 000 in monthly sales, the overhead percentage would be about 16%.