Understanding Manufacturing Overhead Flashcards
What is manufacturing overhead?
Manufacturing overhead refers to all indirect costs associated with the production process that cannot be directly traced to specific units of product.
True or False: Manufacturing overhead includes direct materials and direct labor costs.
False
Which of the following is NOT considered manufacturing overhead? A) Factory rent B) Direct labor C) Indirect materials D) Depreciation of manufacturing equipment
B) Direct labor
Fill in the blank: The manufacturing overhead rate is calculated by dividing total manufacturing overhead costs by __________.
total direct labor hours or total machine hours
What is the formula to calculate the manufacturing overhead rate?
Manufacturing Overhead Rate = Total Manufacturing Overhead Costs / Total Allocation Base
True or False: The manufacturing overhead rate can vary from one period to another.
True
What type of costs are included in manufacturing overhead?
Costs such as utilities, maintenance, property taxes, and factory supplies.
What is the purpose of calculating the manufacturing overhead rate?
To allocate manufacturing overhead costs to individual units of production.
Which allocation base is commonly used in calculating the manufacturing overhead rate?
Direct labor hours or machine hours.
True or False: Manufacturing overhead is a fixed cost.
False
What does a high manufacturing overhead rate indicate?
It may indicate that a significant amount of indirect costs are being incurred relative to the direct costs.
Fill in the blank: Manufacturing overhead can be classified into __________ and __________ costs.
variable; fixed
What happens if manufacturing overhead is over-allocated?
It can lead to inflated product costs and reduced profitability.
What is the impact of manufacturing overhead on pricing decisions?
It affects the overall cost structure, which in turn influences pricing strategies.
True or False: Manufacturing overhead can be directly traced to specific products.
False
