Commercial Applications
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
Answer
Salary of the finishing cost centre supervisor
Reason — Overhead/indirect cost cannot be wholly and directly identified with a particular product. The supervisor of a finishing cost centre oversees production but does not directly produce any item, so his/her salary is indirect labour and forms part of factory overhead. Raw material is direct material (direct cost), and wages paid to labour engaged in actual production are direct labour (direct cost) — neither is an overhead.
Related Questions
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.
Amount spent to purchase a machinery is the example of …………… cost.
- Variable
- Fixed
- Prime
- None of these
Variable cost per unit increases when ……………
- Volume of production decreases
- Volume of production increases
- Cost of raw material decreases
- Tax decreases
An example of a production overhead would be ……………
- Material
- Rent
- Labour cost
- Supervisory cost