Match The Following Overhead Costs With Their Source Documents. (2024)

FAQs

Which are the overhead costs? ›

Overhead refers to the costs of running a business that are not directly related to producing a good or service. These costs can be fixed, such as rent, or variable, such as transport costs. They can also be semi-variable, such as utilities.

Accounting fees, advertising, insurance, interest, legal fees, labour costs, rent, repairs, supplies, taxes, phone bills, travel expenses, and utilities are examples of overhead costs. Indirect expenses and fixed costs, two accounting concepts, are frequently linked to overheads.

First, the overhead is collected from different source documents, for different items of overhead expenses, the documents which are used for the collection, allocation and apportionment of overheads are standing order numbers, departmental distribution summary, journal, invoice and payroll.

Overhead expenses include accounting fees, advertising, insurance, interest, legal fees, labor burden, rent, repairs, supplies, taxes, telephone bills, travel expenditures, and utilities.

The factory heating and lighting costs are factory expenses, hence can be considered as a factory overhead.

To calculate the overhead rate, divide the indirect costs by the direct costs and multiply by 100. If your overhead rate is 20%, the business spends 20% of its revenue on producing a good or providing services. A lower overhead rate indicates efficiency and more profits.

Overhead expenses are ongoing costs required to run a business but are not directly tied to the production of goods or services. Examples include rent, utilities, insurance, and administrative salaries. Expenses can be divided into several different types, including equipment costs, inventory, and facilities costs.

Actual Overhead costs are the true costs incurred and typically include things like indirect materials, indirect labor, factory supplies used, factory insurance, factory depreciation, factory maintenance and repairs, factory taxes, etc.

Overheads may also be classified on the basis of behaviour such as variable overheads, semi-variable overheads and fixed overheads. Variable overheads comprise of expenses which vary in proportion to the change of volume of production. For example, cost of utilities etc. volume of production such as salaries, rent etc.

What is a Source Document? In accounting, the definition of a source document is a piece of paper that proves that a transaction has occurred. Source documents contain pertinent information about the transaction, such as the date, the dollar amounts, the involved parties, and the purpose of the transaction.

Where are source documents recorded? ›

Any information generated through source documents should be properly recorded in either the company's journal, accounting software, or financial books. After the initial recording, all documents should be preserved and organized into a file and put into a system so they can be retrieved at any time.

Overhead costs FAQ

Overhead costs are those that are not directly related to the production of goods or services, but are necessary for the operation of a business. Examples of overhead costs include rent, utilities, insurance, legal fees, office supplies, advertising, payroll, and accounting fees.

Overhead costs are fixed operating expenses that aren't linked to a product or a service. These are typically regularly occurring expenses that the company needs to operate like internet costs, insurance, rent, employee salaries, utilities, accounting fees, legal fees, office supplies, etc.

Overhead costs include things like rent and utilities, business licenses, accounting fees, advertising expenses, and payroll. These costs are fairly predictable and constant, whereas direct costs, such as raw materials or packaging supplies, are directly correlated to the product or service you provide.

Which costs are overhead? Overhead costs are those that are not directly related to the production of goods or services, but are necessary for the operation of a business. Examples of overhead costs include rent, utilities, insurance, legal fees, office supplies, advertising, payroll, and accounting fees.

Overhead typically includes rent, utilities, insurance, and administrative wages. Overhead does not include expenses that go directly into a business's products or services, such as raw materials or worker salaries, which are known as operating costs or direct costs.