Issues That Must Be Resolved in Accounting for Factory Overhead

question 34

Multiple Choice

Issues that must be resolved in accounting for factory overhead are all of the following except:

• A)The allocation of common costs between activities
• B)The assignment of service department costs to production departments
• C)How to assign factory overhead costs as product costs
• D)How to calculate prime cost

---

Definitions:

Fixed Expenses

Costs that do not change with the level of production or sales over a certain period, such as rent, salaries, and insurance.

Unit Contribution Margin

The difference between the selling price of a unit and its variable costs, indicating how much each unit contributes to covering fixed costs and generating profit.

Sales Volume

The total number of units sold within a specific period, often used as an indicator of business performance.

Variable Expense

Costs that change in proportion to the level of production or sales activity.