Match The Following Overhead Costs With Their Source Documents. (2024)

FAQs

Which are the overhead costs? ›

Overhead refers to the costs of running a business that are not directly related to producing a good or service. These costs can be fixed, such as rent, or variable, such as transport costs. They can also be semi-variable, such as utilities.

Overhead expenses include accounting fees, advertising, insurance, interest, legal fees, labor burden, rent, repairs, supplies, taxes, telephone bills, travel expenditures, and utilities.

Property taxes and insurance premiums paid on a factory building are examples of manufacturing overhead.

First, the overhead is collected from different source documents, for different items of overhead expenses, the documents which are used for the collection, allocation and apportionment of overheads are standing order numbers, departmental distribution summary, journal, invoice and payroll.

Overhead costs FAQ

Overhead costs are those that are not directly related to the production of goods or services, but are necessary for the operation of a business. Examples of overhead costs include rent, utilities, insurance, legal fees, office supplies, advertising, payroll, and accounting fees.

To calculate the overhead rate, divide the indirect costs by the direct costs and multiply by 100. If your overhead rate is 20%, the business spends 20% of its revenue on producing a good or providing services. A lower overhead rate indicates efficiency and more profits.

Overhead expenses are other costs not related to labor, direct materials, or production. They represent more static costs and pertain to general business functions, such as paying accounting personnel and facility costs. These costs are generally ongoing regardless of whether a business makes any revenue.

Actual Overhead costs are the true costs incurred and typically include things like indirect materials, indirect labor, factory supplies used, factory insurance, factory depreciation, factory maintenance and repairs, factory taxes, etc.

Overheads may also be classified on the basis of behaviour such as variable overheads, semi-variable overheads and fixed overheads. Variable overheads comprise of expenses which vary in proportion to the change of volume of production. For example, cost of utilities etc. volume of production such as salaries, rent etc.

Examples of fixed overhead include rent, employee salaries, insurance premiums, renewable business licenses, fixed depreciation of some assets, and subscriptions for things like website hosting and business software.

What is overhead quizlet? ›

Defined as 'expenditure on labour, materials or expenses that cannot be economically identified with a specific saleable cost unit'.

Example of applied overhead

The company incurs $10,000 of overhead costs during 4,000 hours in the period and performs the following calculation:Applied overhead = $10,000 / 4,000 = $2.50This means that management applies the costs at a rate of $2.50 per hour.

In business accounting, source documents would include items such as invoices, receipts, deposit slips, checks, travel documents, timecards, orders, credit memos, etc. With advances in technology, source documents now also include electronic records, such as an emailed receipt or an electronic bank statement.

Typical source documents include sales invoices, cash receipts, cash register slip, credit notes and deposit slip.

In the accounting industry, source documents include receipts, bills, invoices, statements, checks – i.e., anything that documents a transaction. Any time a business spends or receives money, a source document is created. Source documents are an integral part of the accounting and bookkeeping process.

Overhead is defined as General Overhead Cost (Indirect Expenses) to include: Contractor or Subcontractor's office expenses (office rent or lease expense, office supplies, utilities, insurance, communication, office equipment, furniture, and taxes).

Behavioural Classification- On the basis of behaviour, overheads can be classified as variable overhead, fixed overhead and semi-variable overhead. Variable overheads- are those overheads that vary in direct proportion with the level of activity. For example, indirect wages, salesman's commission etc.

Standard overhead costs include rent, utilities, and insurance payments, while operating expenses may include salaries, depreciation, and delivery charges.