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Overhead Cost Control Interview Questions & Answers - Learning Mode

Overhead Cost Control Interview Questions & Answers - Learning Mode

Overhead expenses are all costs on the income statement except for direct labor,direct materials,and direct expenses. Overhead expenses include accounting fees,advertising, insurance,interest,legal fees,labor burden, rent,repairs, supplies,taxes,telephone bills, travel expenditures,and utilities.

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Overhead Cost Control Interview Questions & Answers - Learning Mode
Try Overhead Cost Control Interview Questions & Answers - Exam Mode
Question: What is secondary overhead distribution?

Answer: This process of apportioning service department expenses among the production departments is called secondary distribution of overheads.In other words,secondary distribution is the reapportionment of service department expenses among the production departments after completion of primary distribution. Source:
Question: What points are to be noted while preparing primary overhead distribution?

Answer: While preparing overheads distribution summary, it is important to note that the direct costs of the service departments should be considered as overheads.Hence the direct material, direct labor and direct expenses of the service departments are allocated directly and recorded in the overheads distribution summary since these are overheads from production point of view.But the direct material, direct labor and direct expenses of the production departments need to be excluded from this summary si Source:
Question: What do you mean by overhead expenses?

Answer: Overhead expenses are all costs on the income statement except for direct labor,direct materials, and direct expenses.Overhead expenses include accounting fees,advertising, insurance,interest,legal fees,labor burden, rent,repairs,supplies,taxes,telephone bills,travel expenditures,and utilities. Source:
Question: What is primary overhead distribution?

Answer: Primary distribution of overheads refers to allocation and apportionment of overhead expenses among production and service departments of an organisation.This process involves allocation of overheads which can be directly identified with a particular department and apportionment of common item of overheads on appropriate basis among all the departments.
Question: What are the drawbacks of the "Percentage on Direct Wages" method.

Answer: a)If workers are remunerated on piece basis, direct wages will not be connected with time and this system will ignore the question of time taken by different jobs for completion.
b)No distinction is made between jobs done on machines and those done by hand only. There is a need to distinguish not only between such jobs but also between jobs done by different machines. Source:
Question: Name the two types of business overheads.

Answer: a)Administrative Overhead
b)Manufacturing Overhead Source:
Question: What are the disadvantages of machine hour rate?

Answer: 1.It involves additional work in assessing the working hours of machines and thus it is a costly method.
2.It does not take into account expenses that are not proportional to the working hours of machines.
3.It gives inaccurate results if manual labor is equally important.
4.It is difficult to estimate the machine hours especially when production program is not available in advance.
5.Blanket rate cannot be used and it makes the method more costly.
Question: What are the advantages of machine hour rate?

Answer: 1.It helps to compare the relative efficiencies and cost of operating different machines.
2.It brings to light the existence and extent of idle time of machines.
3.It enables the management to decide how far the use of machine work is preferable to manual work.
4.It is most scientific, practical and accurate method of recovery of manufacturing overheads.
5.Cost reports prepared with the help of such rate are dependable and can help the management in decision-making.
6.It provides Source:
Question: What information is required for calculating machine hour rate?

Answer: The information required for calculation of machine hour rate is cost of the machine;cost of installation of the machine;scrap value,if any;life of the machine in hours;standing charges like rent etc. allocated to the machine;repairs and maintenance of the machine;power consumption;set up time;cost of lubricants applied on the machine and insurance premium of the machine,if any.
Question: What do you understand by manufacturing overhead?

Answer: Manufacturing overheads are all costs endured by a business that is within the physical platform in which the product or service is created. Source:
Question: What do you understand by administrative overhead?

Answer: Administrative overheads include items such as utilities, strategic planning, and various supporting functions. These costs are treated as overheads due to the fact that they aren't directly related to any particular function of the organization nor does it directly result in generating any profits.Instead,these costs simply take on the role of supporting all of the business'other functions. Source:
Question: What is the difference between administrative and manufacturing overhead?

Answer: Difference between manufacturing overheads and administrative overheads is that manufacturing overheads are categorized within a factory or office in which the sale takes place. Whilst administrative overheads is typically categorized within some sort of back-office or supporting office.
Question: What is the advantage of repeated redistribution method?

Answer: This method has an added advantage that even if the number of service departments is more than two, the reapportionment can be done conveniently.
Question: Explain briefly the three methods of reciprocal service method.

Answer: (i) Simultaneous Equation Method: Under this method simultaneous equations are developed and solved to ascertain the overhead costs of each service department.These overhead costs are then redistributed to production departments on the basis of given percentage.
(ii) Repeated Redistribution Method: Under repeated redistribution method,first of all, the total overhead costs as per primary distribution are written below the respective departments. Then as per the percentage given for distribut Source:
Question: Give the various examples of administrative overhead.

Answer: a)Employee salaries
b)Office equipment and supplies
c)Travel and entertainment costs Source:
Question: What is the difference between Allocation and Apportionment?

Answer: The major difference between allocation and apportionment methods are that allocation is used when the overhead can be directly related to one department and cost center, and apportionment is used when the overhead arises from a number of departments.In allocation, the entire amount of the cost will be allocated to one department, and in apportionment proportions of the costs will be divided among their respective cost centers. Allocation is much easier and simpler to do as the expense will dire Source:
Question: Give examples of manufacturing overheads?

Answer: a)Property Taxes on Production Facilities
b)Rent of Factory Building
c)Utilities for factory
Question: Explain the three methods of absorption of factory overhead?

Answer: a)The ?Percentage on Materials? or Direct Materials Cost Basis: On the basis of estimates or past experience, the percentage of factory overheads to the total value of materials used is determined.On the assumption that for various jobs the relationship between materials and overheads will not change,a charge for these is made to the cost of production of each unit of cost as such and such proportion of materials used.
b)The ?Percentage on Direct Wages? or Direct Labor Cost Basis:This method Source:
Question: What is Apportionment?

Answer: Cost apportionment occurs when a specific cost cannot be directly identified with one specific cost center. Any cost that does not belong to one department and is shared by a number of departments will be divided among these departments using apportionment. Source:
Question: What is machine hour rate?

Answer: A method of calculating production overhead absorption rate, where the number of hours the machines are expected to work is divided into the budgeted production overhead to give a rate per hour. Source:

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