Volume-based rates are appropriate in situations where the incurrence of factory overhead:

Related Questions

• Q10:

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  • Related Questions
  • What is Factory Overhead?
  • Examples of Factory Overhead
  • Factory Overhead Variances
  • Factory Overhead Best Practices
  • Terms Similar to Factory Overhead
  • What is volume
  • What is volume
  • Which of the following can produce unit product costs that fluctuate significantly quizlet?
  • Which of the following is an indirect cost of manufacturing?

  The ideal criterion for choosing an allocation base for overhead is: A)Ease of calculation. B)A cause-and-effect relationship. C)Ease of use. D)Its preciseness. E)Its applicability.

  

• Q11:

  Which of the following can produce unit product costs that fluctuate significantly? A)Actual costing system. B)Standard costing system. C)Normal costing system. D)Industry costing system.

• Q12:

  Which one of the following records and summarizes the costs of direct materials,direct labor,and factory overhead for a particular job? A)Purchase order. B)Material requisition form. C)Job product cost document. D)Bill of materials. E)Job cost sheet.

• Q13:

  The two main advantages of using predetermined factory overhead rates are to provide more accurate unit cost information and to: A)Simplify the accounting process. B)Provide cost information on a timely basis. C)Insure transmission of correct data. D)Extend the useful life of the cost data. E)Adjust for variances in data sources.

• Q14:

  If a firm is following the cost leadership strategy,and overhead accounts are complex,then the: A)Firm should use a process costing system. B)Firm can use either a process or job costing system. C)Traditional volume-based job costing will not usually provide the need cost accuracy. D)Only recourse is to install a hybrid costing system. E)Firm should attempt to collect only material and labor costs.

• Q16:

  The three major differences between process and job order costing systems are those relating to: A)Quantity,quality,and cost. B)Speed,accuracy,and design. C)Cost object,product or service variety,and timing of unit cost calculation. D)Responsibility for cost,system design,and authorization codes.

• Q17:

  Volume-based rates are appropriate in situations where the incurrence of factory overhead: A)Is related to multiple cost drivers. B)Is related to several non-homogeneous cost drivers. C)Is related to a single,common cost driver. D)Varies considerably from period to period. E)Is relatively small in amount.

• Q18:

  A normal costing system uses actual costs for direct materials and direct labor,and: A)Budgeted costs for factory overhead. B)Estimated factory overhead costs based on material cost. C)Estimated factory overhead costs based on labor cost. D)Estimated costs for factory overhead. E)Charges actual factory overhead as a lump sum.

• Q19:

  Which one of the following is the amount of factory overhead applied that exceeds the actual factory overhead cost? A)Factory overhead applied. B)Actual factory overhead. C)Overapplied overhead. D)Allocated factory overhead. E)Underapplied overhead.

• Q20:

  Which one of the following is used by the production department supervisor to request the materials for production? A)Purchase order. B)Material requisition. C)Bill of materials. D)Product job cost schedule. E)Job cost sheet.

What is Factory Overhead?

Factory overhead is the costs incurred during the manufacturing process, not including the costs of direct labor and direct materials. Factory overhead is normally aggregated into cost pools and allocated to units produced during the period. It is charged to expense when the produced units are later sold as finished goods or written off. The allocation of factory overhead to units produced is avoided under the direct costing methodology, but is mandated under absorption costing. The allocation of factory overhead is required when producing financial statements under the dictates of the major accounting frameworks.

Examples of Factory Overhead

Examples of factory overhead costs are noted below:

• Production supervisor salaries

• Quality assurance salaries

• Materials management salaries

• Factory rent

• Factory utilities

• Factory building insurance

• Fringe benefits

• Depreciation

• Equipment setup costs

• Equipment maintenance

• Factory supplies

• Factory small tools charged to expense

• Insurance on production facilities and equipment

• Property taxes on production facilities

The range of possible factory overhead costs can be quite extensive, depending upon the size and complexity of a factory operation and the level of detail at which costs are recorded.

Factory Overhead Variances

After factory overhead is allocated to inventory, the amount actually allocated will vary from the standard amount that had been budgeted to be allocated. This difference is caused by either a spending variance or an efficiency variance. The spending variance occurs because the actual amount of factory overhead expenditure incurred in the period was different from the standard amount that had been budgeted at some point in the past. The efficiency variance occurs because the the amount of units to which the factory overhead was allocated varied from the standard amount of production that had been expected when the allocation rate was set up.

Factory Overhead Best Practices

The use of factory overhead is mandated by accounting standards, but does not bring real value to the understanding of overhead costs, so a best practice is to minimize the complexity of the factory overhead allocation methodology. Ideally, there should be a small number of highly aggregated factory overhead accounts that are pooled into a single cost pool, and then allocated using a simple methodology. Also, the amount of factory overhead analysis and recordation work can be mitigated by charging all immaterial factory costs to expense as incurred.

Terms Similar to Factory Overhead

Factory overhead is also known as manufacturing overhead or manufacturing burden.

What is volume

What is volume

Which of the following can produce unit product costs that fluctuate significantly quizlet?

Which of the following is an indirect cost of manufacturing?