Commercial Applications
Which of the following is best suited meaning of overhead?
- Overhead is the cost incurred in the course of buying a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department.
- Overhead is the cost incurred in the course of making a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department.
- Overhead is the cost incurred in the course of selling a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department.
- Overhead is the cost incurred in the course of advertising a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department.
Answer
Overhead is the cost incurred in the course of making a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department.
Reason — The standard definition of overhead refers to indirect costs incurred while making a product, providing a service or running a department which cannot be traced directly. Buying, selling and advertising are too narrow — they cover only one aspect (purchase or selling overheads). The "making" version is the comprehensive textbook definition that captures the essence of overhead as indirect costs of operations.
Related Questions
Wages paid to a labour who was engaged in the production activities can be termed as ……………
- Direct cost
- Indirect cost
- Sunk cost
- Implicit cost
Which of the following best describes a fixed cost?
- A cost that remains at the same level up to a particular level of output.
- The cost changes with levels of output.
- A cost that remains at the same level when output increases.
- None of these
Amount spent to purchase a machinery is the example of …………… cost.
- Variable
- Fixed
- Prime
- None of these
Which of the following is overhead cost?
- Amount spent on raw material
- Salary of the finishing cost centre supervisor
- Wages paid to labour
- None of these