Overhead Rates Developed for Service Organisations Usually Include

question 63

Multiple Choice

Overhead rates developed for service organisations usually include:
i. upstream costs.
ii. downstream costs.
iii. production costs.

• A) i
• B) ii
• C) i and ii
• D) i, ii and iii

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Definitions:

Variable Manufacturing Overhead

The portion of variable overhead costs that are directly associated with the manufacturing process, including costs like indirect materials and utilities.

Machine-Hours

A measure of production output or activity based on the number of hours machines are operated in the manufacturing process.

Predetermined Overhead Rate

A predetermined overhead rate is the rate used to allocate estimated overhead costs to products or services based on a specific cost driver.

Machine-Hours

The total hours that machinery is operated in the production process, used as a basis for allocating manufacturing overhead.