The following information is provided for the year. Actual direct labour hours worked 36,000 Budgeted overhead $400,000 Budgeted direct labour hours 40,000 Actual overhead costs incurred $360,000 If normal costing is used, the amount of overhead applied for the year would be:

The following information is provided for the year. Actual direct labour hours worked 36,000 Budgeted overhead $400,000 Budgeted direct labour hours 40,000 Actual overhead costs incurred $360,000 If normal costing is used, the amount of overhead applied for the year would be:

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

100%

The following information is provided for the year.

Actual direct labour hours worked	36,000
Budgeted overhead	$400,000
Budgeted direct labour hours	40,000
Actual overhead costs incurred	$360,000

If normal costing is used, the amount of overhead applied for the year would be:

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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