Costing for Overhead Quiz

Which of the following is NOT included in manufacturing overhead?

• Indirect materials

• Factory utilities

• Factory property taxes

• Advertising expenses

What does non-manufacturing overhead include?

• Indirect labor in the factory

• Depreciation on factory equipment

• Occupancy expenses of administrative office

• Direct materials used in production

Which of the following is an example of a non-manufacturing cost?

• Factory insurance

• Electricity used to operate factory equipment

• Office rent for administrative staff

• Indirect materials used in production

Why is estimated overhead used in product costing?

• To eliminate the need for actual cost data

• Because actual overhead can never be determined

• Because it allows for quicker product cost estimation

• To reduce overall costs

What does the term "absorb" refer to in overhead allocation?

• Assigning overhead to service departments

• Attaching overhead costs to products or services

• Recalculating overhead at year-end

• Eliminating overhead costs entirely

In Stage 1 of overhead allocation, which of the following is the correct order?

• Reassign service department overhead → Allocate to products → Allocate to cost centers

• Allocate to cost centers → Allocate to products → Reassign service department overhead

• Allocate to cost centers → Reassign service department overhead → Allocate to products

• Allocate to products → Allocate to cost centers → Reassign service department overhead

What is the correct base to allocate electricity overhead?

• Number of employees

• Floor area

• Machine hours

• Direct wages

What is the formula for calculating the Overhead Absorption Rate (OAR)?

• Estimated actual overhead / Estimated number of products

• Estimated total cost / Actual total labor hours

• Estimated total overhead / Estimated total cost drivers

• Actual total overhead / Actual total cost drivers

Which reapportionment method assumes service departments do not serve each other?

• Repeated distribution method

• Reciprocal method

• Direct allocation method

• Simultaneous equation method

Which of the following best describes the function of cost drivers?

• They represent fixed costs in production

• They determine how direct materials are allocated

• They are used to spread overhead based on usage

• They are applied only to non-manufacturing costs