Question

Factory overhead is also known as:

Option 1: Operating costs
Option 2: Administrative expenses
Option 3: Indirect costs
Option 4: Variable costs

Answer 1

Factory overhead is also known as indirect costs. Spreading the overhead refers to allocating or distributing the factory overhead costs among the different products or services being produced by a company.

Step-by-step explanation:

Factory overhead is also known as indirect costs. It refers to the costs incurred in the production process that cannot be directly attributed to a specific product or service. Examples of factory overhead include expenses such as rent, utilities, insurance, depreciation of machinery, and maintenance costs.

Spreading the overhead refers to allocating or distributing the factory overhead costs among the different products or services being produced by a company. This is done based on certain allocation methods, such as labor hours, machine hours, or material usage, to determine the share of overhead each product should bear. By spreading the overhead, companies can accurately determine the cost of production for each unit and make informed pricing decisions.