Overheads and Cost Management Quiz

Which of the following best describes the term "overheads"?

• Costs that can be directly traced to a specific product.

• Costs of materials, labor, and expenses that cannot be economically identified with a product.

• Costs related only to production activities.

• Costs that are always variable in nature.

Which of the following is an example of a non-production overhead?

• Factory rent

• Machine depreciation

• Sales commission

• Indirect labor

What is the purpose of calculating the Overhead Absorption Rate (OAR)?

• To allocate direct costs to products.

• To absorb overheads into products to ensure all production costs are included.

• To calculate the selling price of a product.

• To determine the actual overheads incurred.

Which of the following is a basis for apportioning rent and rates to cost centres?

• Number of employees

• Machine operating hours

• Floor area

• Net book value of machinery

In the overhead absorption process, what does "re-apportionment" refer to?

• Charging an entire expense to a single cost centre.

• Sharing out total overheads to all cost centres based on a specific basis.

• Sharing out the overheads of service cost centres to production cost centres.

• Absorbing overheads into individual units of production.

Which of the following methods of re-apportionment involves sharing overheads from one service cost centre to another service cost centre?

• Direct method

• Step-down method

• Reciprocal method

• Absorption method

If the actual overheads are 50,000 and the absorbed overheads are 48,000, what is the result?

• Over-absorbed overhead of 2,000

• Under−absorbed overhead of 2,000

• Over-absorbed overhead of 98,000

• Under−absorbed overhead of 98,000

Which of the following is NOT a basis for calculating the Overhead Absorption Rate (OAR)?

• Percentage of prime costs

• Percentage of sales price

• Percentage of machine hours

• Percentage of direct labor hours

What is the journal entry to recognize under-absorbed overheads in the income statement?

• Debit Production Overheads Account, Credit Statement of Profit or Loss

• Debit Statement of Profit or Loss, Credit Production Overheads Account

• Debit Work-in-Progress Account, Credit Production Overheads Account

• Debit Materials Control Account, Credit Production Overheads Account

Which of the following statements is true regarding fixed overheads?

• Fixed overheads always change with the level of activity.

• Fixed overheads remain constant regardless of the level of activity.

• Fixed overheads are always directly attributable to a specific product.

• Fixed overheads are only related to non-production activities.