Question

Accounting procedure for transferring non-manufacturing overheads to profit and loss account

A. Allocate non-manufacturing overheads based on direct labor hours.

B. Transfer non-manufacturing overheads directly to finished goods.

C. Allocate non-manufacturing overheads to cost pools based on activities and then transfer to the profit and loss account.

D. Exclude non-manufacturing overheads from the accounting system.

Answer 1

The correct accounting procedure for transferring non-manufacturing overheads is to allocate them to cost pools based on activities and then transfer to the profit and loss account.

Step-by-step explanation:

The correct accounting procedure for transferring non-manufacturing overheads to the profit and loss account is option C: Allocate non-manufacturing overheads to cost pools based on activities and then transfer to the profit and loss account.

This method involves identifying cost pools based on different activities such as administration, marketing, or research and development. The non-manufacturing overheads are then allocated to these cost pools based on the respective activities.

Once the allocation is done, the overheads from each cost pool are transferred to the profit and loss account, thereby reflecting their impact on the overall financial performance of the business.