Question

Overhead costs:

Multiple Choice

• Are directly related to production.

• Can be traced to units of product in the same way that direct materials can.

• Cannot be traced to units of product in the same way that direct labor can.

• Are period costs.

• Include only fixed costs.

Answer 1

--The cost can be classified be as 'direct cost' (which are directly related to production process) and 'indirect cost'.

--Indirect costs are also called OVERHEAD cost. Overhead cost can be indirect related to production (like factory expenses) or not at all related (office rent).

--Unlike direct cost, indirect cost or Overheads cannot be traced to units of product.

--Correct Answer = Option #3: Overhead costs 'Cannot be traced to units of product in the same way that direct labor can'