Handout 3

Question 1

This pertains to the labor of the employees which directly contributes in making a
particular product.

Answer 1

Direct labor

Question 2

This pertains to the labor of the employees which does not contribute to the
construction, composition, or the condition of a particular product.

Answer 2

Indirect labor

Question 3

These include the basic wages or the basic rate of pay. These also include allowances, overtime pay, bonuses, holiday pay, government mandated benefits and special incentives that are being given by an organization or company to their respective employees.

Answer 3

Monetary Benefits

Question 4

These include hospital facilities, subsidized food, subsidized or free
transport, and recreational facilities that are being provided by an organization to their
employees.

Answer 4

Non-monetary Benefits

Question 5

These involve the benefits which are not paid in a given month but
in the future time. Examples of these benefits include pension and gratuity among others.

Answer 5

Deferred Monetary Benefits

Question 6

This comprises the indirect material cost, indirect wages, and indirect
expenses incurred with respect to the manufacturing activity.

Answer 6

Production overhead

Question 7

This comprises indirect material, indirect wages and indirect expenses
incurred with respect to the management of an organization.

Answer 7

Administration overhead

Question 8

This comprises the indirect material cost, indirect wages,
and indirect expenses incurred on the research and development activities of an organization.

Answer 8

Research and development overhead

Question 9

This comprises the indirect material, indirect wages, and indirect expenses which are incurred for creating and stimulating demand for a firm’s products.

Answer 9

Selling overhead.

Question 10

This comprises the indirect material, indirect wages, and indirect expenses
incurred for making a firm’s products available to customers.

Answer 10

Distribution overhead

Question 11

These are materials which cannot be measured in any standardized physical units but are essential for the smooth running of the manufacturing process.

Answer 11

Indirect materials

Question 12

This pertains to the costs which do not alter the construction or composition of a product.

Answer 12

Indirect labor

Question 13

These are costs which cannot be directly allocated to cost units.

Answer 13

Indirect expenses

Question 14

This pertains to the costs which remain constant per unit.

Answer 14

Variable overhead

Question 15

This pertains to the costs which remain unaffected by the change in the volume
of output.

Answer 15

Fixed overhead

Question 16

This pertains to the costs which are partly fixed and partly variable. Some overheads possess characteristics of both fixed and variable costs.

Answer 16

Semi-variable overhead

Question 17

This is the aggregate of the costs of formulating the policy, directing
the organization, and controlling the operations of an undertaking which is not directly related to
production, selling, distribution and research or development, or any other function.

Answer 17

Administration overhead

Question 18

This is the aggregate of indirect materials, indirect wages, and indirect expenses incurred for creating and stimulating demand for a firm’s products, securing and executing the orders.

Answer 18

Selling overhead

Question 19

These involve the direct distribution of traceable overheads to a particular job
or department.

Answer 19

Direct allocation

Question 20

These involve the apportionment of overheads on the basis of direct labor hours for different departments.

Answer 20

Labor hours

Question 21

These involve distributing overheads on the basis of machine hours relevant to the activities which are entirely dependent on machinery.

Answer 21

Machine hours

Question 22

This involves the apportionment of overheads that are incurred for the welfare of workers on the basis of the number of employees in each department.

Answer 22

Number of staff

Question 23

This involves the apportionment of overhead expenses such as rent, tax, lighting, and building-maintenance expenses on the basis of the space occupied by different departments.

Answer 23

Floor area

Question 24

This involves the apportionment of overheads like depreciation, insurance
premium, repairs, and maintenance on the basis of the capital value of assets.

Answer 24

Capital value

Question 25

These involve the apportionment of overheads like lighting expenses on the basis of light points in various departments.

Answer 25

Light points

Question 26

These involve the apportionment of overheads such as power expenses on the basis of kilowatt hour (KWH)

Answer 26

Kilowatt hours