While Calculating the Costs of Products and Services, a Standard

question 84

Multiple Choice

While calculating the costs of products and services, a standard costing system ________.

• A) allocates overhead costs on the basis of the actual overhead-cost rates
• B) uses standard costs to determine the cost of products
• C) does not keep track of overhead cost
• D) traces direct costs to output by multiplying the standard prices or rates by the actual quantities

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Definitions:

Factory Overhead

Indirect costs associated with manufacturing, including utilities, maintenance, and depreciation of production facilities, not directly attributed to a specific product.

Product Cost

The total expense incurred to create and manufacture a product, including direct labor, materials, and overhead.

Maintenance

The process of preserving equipment, systems, and buildings in proper working condition through routine checks, repairs, and updates.

Factory Equipment

Factory equipment encompasses the machinery and tools used in manufacturing processes to produce goods.