Overhead Analysis

Question 1

Indirect costs

Answer 1

Indirect costs are not directly linked to the manufacturing process, but are incurred by other processes which are necessary to enable the production process to be carried out.

Question 2

Cost centre

Answer 2

Refers to any part of a business where production takes place and to which costs can be charged e.g. department, item of equipment, machine or person

Question 3

Examples of cost centres

Answer 3

Machine shop
Finishing dept

Question 4

Production and process cost centres

Answer 4

A production cost centre and process cost centre is a department where production takes place resulting in a product which may be completely finished and ready for sale

Question 5

Service cost centre

Answer 5

Service cost centre is a department which provides a service to the production areas of the factory

Question 6

Cost unit

Answer 6

A cost unit is the product,service or time period which finally absorbs all costs including overheads from cost centres

Question 7

Examples of cost units

Answer 7

Tyre
Canteen meal