Overhead allocation, apportionment and absorption

When allocating overhead costs, which basis would be most appropriate for the canteen costs?

• Number of employees
• Machine hours
• Direct labour hours
• Floor area

What is the primary purpose of absorption costing?

• To attribute all overheads to products
• To allocate only variable costs to products
• To determine the break-even point
• To calculate the contribution margin

The overhead absorption rate for a manufacturing business that makes widgets can be calculated using which of the following formulas?

• Total overheads / Direct materials
• Total overheads / Machine hours
• Total overheads / Number of units
• Total overheads / Total direct costs

Which of the following bases would be most suitable for apportioning rent expenses in a factory?

• Number of employees
• Direct labour hours
• Floor area
• Machine hours

In cost accounting, overhead absorption is primarily aimed at achieving which of the following?

• Accurate cost control
• Allocation of costs to departments
• Equitable distribution of costs to products
• Identification of non-value-added activities

Which of the following is a disadvantage of using a single overhead absorption rate for a multi-product company?

• It simplifies the costing process
• It may lead to over or under absorption of overheads
• It is easier to apply
• It ensures accuracy in product costing

When overheads are under-absorbed, which of the following is true?

• The overhead absorption rate was too high
• Actual overheads were less than absorbed overheads
• Absorbed overheads were less than actual overheads
• There is no impact on profit

Which of the following would be an appropriate basis for apportioning supervisory salaries in a production department?

• Direct labour hours
• Machine hours
• Units produced
• Floor area