Answered: Budgeted overhead cost = $82,000…

Budgeted overhead cost = $82,000 Underapplied overhead = $6,860 Budgeted activity = 5,000 hours Actual overhead cost = $70,000 Determine the actual activity: _______________ hours

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

Budgeted overhead cost = $82,000

Underapplied overhead = $6,860

Budgeted activity = 5,000 hours

Actual overhead cost = $70,000

Determine the actual activity: _______________ hours

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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