Overhead Costs Are Assigned to Production Using an Overhead Application

question 21

Multiple Choice

Overhead costs are assigned to production using an overhead application rate,whereas no such "application rate" is used to assign the costs of direct materials and direct labor to production.The reason for this difference in procedures is that:

• A)Overhead is an indirect cost which cannot be traced easily and directly to specific units of product.
• B)Overhead is always larger in dollar amount than either direct materials or direct labor.
• C)The amounts of direct material and direct labor applicable to each unit of production cannot be determined as easily as the amount of overhead.
• D)Overhead is always equal to a constant percentage of direct labor costs.

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Definitions:

Budgeted Sales

The projected amount of sales, in units or monetary terms, as planned for a future period.

Sales Forecast

A projection of future sales revenue, often based on historical sales data, market trends, and economic conditions.

Growth

Refers to the increase in size, value, or importance of an entity over time.

Sales

The trade of goods or services for financial compensation, which serves as the fundamental revenue generator for the majority of corporations.