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

FAQs

Which are the overhead costs? ›

Overhead costs are indirect costs associated with running a business. Overhead does not include Cost of Goods Sold (costs directly associated with producing your goods or service). The three types of overhead costs are fixed, variable, and semi-variable costs.

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.

Collection of overheads can be done from the following sources: a) For collecting the expenses of rent, insurance and other expenses invoice can be used. b) Journal entries are also a source of collecting the overheads. c) Store requisitions are used to collect the indirect materials.

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.

The costs associated with maintaining the office or manufacturing space companies must have in order to perform their business is an example of overhead. This includes rent as well as utilities such as water, gas, electricity, internet, and phone service.

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.

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.

What are the 2 types of overhead costs? ›

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.

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.

Functional classification- Functionally, overheads are classified into Factory overheads, Office and Administrative overheads, and Selling and Distribution overheads. Factory overhead is actually manufacturing overhead while other two are non-manufacturing overhead.