ACCOUNTING FOR FACTORY OVERHEAD

Question 1

is an aggregate of indirect materials, indirect wages and indirect expenses.

Answer 1

Overheads

Question 2

“Any expenditure over and above the Prime Cost [Direct materials and Direct labour].”

Answer 2

Overheads

Question 2

can be specifically and exclusively identified with a given cost object –hence they can be accurately traced to cost objects

Answer 2

Direct costs

Question 2

the total of indirect expenditure is called

Answer 2

Overheads

Question 2

cannot be directly traced to a cost object – therefore they are assigned to cost objects using cost allocations.

Answer 2

Indirect costs

Question 3

is the process of grouping costs according to their common characteristics and establishment of a series of special groups according to cost class

Answer 3

Cost classification

Question 4

classification of overheads according to function

Answer 4

1. Production overheads
2. Administration overheads
3. Selling and packaging
4. Distribution overheads

Question 5

classification of overheads according to elements

Answer 5

1. Indirect Material
2. Indirect Labour
3. Indirect expenses or Overheads

Question 6

Classification of overheads according to behavior

Answer 6

1. Fixed overheads
2. Variable overheads
3. Semi-variable overheads

Question 7

These sheets may be used to keep a subsidiary record of factory overhead expenses.

Answer 7

Factory Overhead Analysis Sheets

Question 8

Expense-type analysis spreadsheet

Answer 8

Factory Overhead Analysis Sheets

Question 9

Department-type analysis spreadsheet

Answer 9

Factory Overhead Analysis Sheets

Question 10

2 main Stages in Overheads Accounting

Answer 10

• Administrative
• Computing

Question 11

1.Collection of Overheads
2.Classification and codification of Overheads

Answer 11

Administrative

Question 12

1. Direct/ specific allocation
2. Apportionment of overheads
3. Re-apportionment of service departments costs to production departments. (Absorption by production units)

Answer 12

Computing

Question 13

is technique of intelligent description of numerous cost accounting heads for recording and controlling. It helps to group items of overheads of similar nature.

Answer 13

Codification (Coding)

Question 14

• it is process of identification of overheads with a specific production or service department

Answer 14

Allocation

Question 14

• It is the allotment of proportions of items to departments or units.

Answer 14

Apportionment

Question 15

allocation example

Answer 15

Overtime wages paid to department

Question 16

Apportionment example

Answer 16

rent, depreciation, repairs
charges

Question 17

are an essential part of the organization, but they do not work directly on the product.

Answer 17

Service departments

Question 18

perform the actual manufacturing operations that physically change the units being processed.

Answer 18

Production departments

Question 19

The costs of the service departments must be apportioned to the ??

Answer 19

production departments

Question 19

Assign all factory overheads to cost centers

Answer 19

• Cost Allocation
• Cost apportionment
• Remember cost centers are…

Question 20

Where a cost can be clearly identified with a cost center or a cost unit, then it can be allocated to that cost center or cost unit.

Answer 20

Cost Allocation

Question 21

It is not possible to identify a discrete item of cost with a cost center and it is necessary to split a cost over several cost centers on some agreed basis

Answer 21

Cost apportionment

Question 22

How the overheads costs are distributed

Answer 22

1. Direct/specific Allocation 2. Primary allocation (Apportionment) 3. Secondary allocation (Re- apportionment)

Question 23

- It refers to spreading the overheads costs to all production and services department on the common basis of distributing.

Answer 23

Primary allocation (apportionment)

Question 23

- It is the allotment of total item cost (e.g. rent) to a particular department.

Answer 23

Direct allocation

Question 24

Primary allocation is also known as

Answer 24

apportionment

Question 24

It refers to apportioning of all service dept. costs to production dept . There are four methods for re- apportionment.

Answer 24

Secondary allocation (Re- apportionment)

Question 25

Secondary allocation is also known as

Answer 25

Re- apportionment

Question 26

Methods of Re-apportionment (Secondary allocation)

Answer 26

1. Direct distribution method 2. Step-down or sequential distribution method 3. Repeated distribution method 4. Simultaneous or Algebraic method

Question 27

The costs of Service department are directly apportioned to production department only.

Answer 27

Direct Distribution Method

Question 28

Distributes service department costs regressively to other service departments and then to production departments.

Answer 28

Sequential Distribution or Step-Down Method

Question 29

Distributes costs by simultaneous equations recognizing the relationship of services rendered by departments to each other.

Answer 29

Algebraic Distribution Method

Question 30

: Under this, the service department costs are repeatedly allocated among the production and service department in the specified percentages until the figures become too small to be significant

Answer 30

Repeated distribution method

Question 31

Methods of re-apportionment continued…

Answer 31

- Direct Distribution Method - Sequential Distribution or Step-Down Method - Algebraic Distribution Method - Repeated distribution method

Question 32

Main Overheads rates

Answer 32

- Predetermined overhead rate - Blanket(Plant wide) OH rate - Multiple overhead rate

Question 32

means that the overhead absorption rate is calculated prior to the accounting period, using estimated or budgeted figures for overheads and units of the absorption base chosen

Answer 32

Predetermined overheads

Question 33

Some commonly used predetermined absorption bases are as follows:

Answer 33

- Direct Labor Hours Method - Machine Hours - Direct Labor Cost Method

Question 34

: It is frequently used in the labour intensive department because overheads assigned to this department are closely related to the direct labour hours worked

Answer 34

Direct Labour Hours

Question 35

: It is most appropriate for the machining department since most of the overheads are closely related to machine hours

Answer 35

Machine Hours

Question 36

This method best serves highly automated departments where the amount of factory overhead cost incurred on a job is primarily a function of the machine time that a job requires.

Answer 36

Machine Hour Method

Question 45

In indirect cost we are using?

Answer 45

Cost allocations

Question 46

Other expenses na nagastos except sa materials and direct labor

Answer 46

Production overheads

Question 47

Expenses kapag nabenta na yung product

Answer 47

Distribution overheads

Question 48

Combination of fixed and variable overheads

Answer 48

Semi-variable overheads

Question 49

Expenses na nagagastos outside the production department

Answer 49

Administration overheads

Question 50

Expenses sa pagbebenta ng products

Answer 50

Selling and packaging

Question 51

Sub stages in overhead accounting

Answer 51

-codification - allocation - apportionment

Question 52

Pre-determined factory overhead rates formula

Answer 52

= budgeted total overhead for cost center ----------————--------------------------- Budgeted total numver of units of produced

Question 53

Overhead absorption rates (OAR) formula

Answer 53

OAR= Total overhead expenses