Overheads

What are overheads in costing?

• Direct costs that are directly attributable to specific goods or services
• Indirect costs that are not directly attributable to specific goods or services
• Variable costs that fluctuate with production levels
• Fixed costs that remain constant regardless of production levels

What are examples of overhead expenses?

• Cost of raw materials
• Rent, utilities, insurance
• Cost of direct labour
• Cost of finished goods

Why are overheads essential for understanding total cost of operations?

• To increase production efficiency
• To reduce overall costs
• To price products or services appropriately
• To avoid profitability

How are overheads typically categorized?

• Labour, materials, and overheads
• Manufacturing, selling, and administrative
• Direct, indirect, and variable
• Fixed, variable, and semi-variable

What is the purpose of accurately allocating overheads to cost objects?

• To increase production costs
• To decrease profitability
• To price products incorrectly
• To ensure profitability

Why is it important for businesses to accurately account for overheads?

• To maximize losses
• To reduce overall costs
• To improve profitability
• To avoid pricing products appropriately

What is the role of overheads in the total cost of operations?

• They have no impact on total cost
• They are the only cost involved
• They contribute to the total cost
• They decrease total cost

How do overheads help businesses price their products or services appropriately?

• By increasing production costs
• By reducing profit margins
• By accurately reflecting the total cost of operations
• By avoiding accounting for indirect costs