Question

An example of a production overhead would be:
A.Material
B.Supervisory cost
C.Labour
D.Rent

Answer 1

HintTo solve this, on should have an idea of what production overhead is
 Production Overhead:
Indirect expenses associated with processes used to produce a good or service.
Production overhead may include expenses such as stationery, utilities, support staff salaries, and or the facilities costs.


Complete step by step solution:
When an owner rents a factory, it is included as an indirect expense of the production as we know that all indirect expenses are called production overhead.
Rent expense can be one of its biggest operating expenses along with employee, wages and marketing costs. For manufacturing companies, rental expenses tied to production are part of factory overhead.
Hence, rent is an example of a production of overhead.
For example, overhead, costs such as the rent for a factory allows workers to manufacture products which can then be sold for a profit. Such expenses are incurred for output generally and not for the particular work order.
In real estate, location is usually the most important factor in the price of rent.


Note: Overheads are often related to accounting concepts such as fixed costs and indirect costs. Mainly there are essentially two types of business overheads: Administrative overheads and manufacturing (Production) overheads. Overhead refers to the ongoing business expenses not directly attributed to creating a product or service. It is important for budgeting purposes but also for determining how much a company must charge for its products or services to make a profit. Administrative office space rent is charged to operating expenses.