Which of the following statements is true about overhead? Answer a. Overhead cos

Question

Which of the following statements is true about overhead? Answer a. Overhead costs are not incurred uniformly throughout the year. b. Overhead costs have a definite, identifiable relationship with units produced. c. Low production in one month would give rise to low unit overhead costs. d. All of these are correct. e. None of these are correct. Which of the following statements is true about overhead? Overhead costs are not incurred uniformly throughout the year. Overhead costs have a definite, identifiable relationship with units produced. Low production in one month would give rise to low unit overhead costs. All of these are correct. None of these are correct. a. Overhead costs are not incurred uniformly throughout the year. b. Overhead costs have a definite, identifiable relationship with units produced. c. Low production in one month would give rise to low unit overhead costs. d. All of these are correct. e. None of these are correct.

Explanation / Answer

An accounting term that refers to all ongoing business expenses not including or related to direct labor, direct materials or third-party expenses that are billed directly to customers. Overhead must be paid for on an ongoing basis, regardless of whether a company is doing a high or low volume of business. It is important not just for budgeting purposes, but for determining how much a company must charge for its products or services to make a profit. For example, a service-based business that operates in a traditional white-collar office setting would have overhead expenses such as rent, utilities and insurance. Overhead expenses can be fixed, meaning they are the same from month to month, or variable, meaning they increase or decrease depending on the business's activity level. They can also be semi-variable, meaning that some portion of the expense will be incurred no matter what, and some portion depends on the level of business activity. Overhead can also be general, meaning that it applies to the company's operations as a whole, or applied, meaning that it can be allocated to a specific project or department. These expenses are typically found on a company's income statement. Hence it is (e) one of them is correct

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