Overheads Questions

1. Which of the following costs would MOST appropriately be apportioned to cost centres on the
basis of floor space occupied?
A. Machine depreciation
B. Indirect material
C. Heat and light
D. Indirect labour

2. Central costs in a business are shared to each cost centre. What term is used for such costs
sharing?
A. Absorption
B. Apportionment
C. Allocation
D. Re-apportionment

3. Actual and budgeted figures for a manufacturing cost centre for a period are:
Actual Budget
Overhead costs $181,250 $150,000
Labour hours 75,000 72,000
Labour hours are used to absorb the overheads in the cost centre. What is the predetermined
overhead absorption rate (to two decimal places)?
A. $2.52
B. $2.42
C. $2.08
D. $2.00

4. A large hospital is in the process of budgeting for the heating costs of its various cost centres.
Which of the following is the BEST basis for apportioning the heating costs to the cost centres?
A. Number of employees per cost centre
B. Cubic metres per cost centre
C. Value of machinery in each cost centre
D. Number of patients per cost centre

5. A factory cost centre absorbs overhead on the basis of machine hours. In a period the budgeted
overhead costs and budgeted activity in the cost centre were $144,000 and 4,100 machine
hours respectively. Actual overhead costs and actual activity in the period were both below
budget at $142,600 and 3,950 machine hours respectively. What was the predetermined
overhead absorption rate per machine hour (to the nearest $0.01)?
A. $36.46
B. $36.10
C. $35.12
 Overheads Questions
D. $34.78

6. Budgeted production overheads, allocated and apportioned to the four cost centres in a factory
for a period, are as follows:
Production cost centres Service cost centres
PCC1 ($) PCC2 ($) Stores ($) Maintenance ($)
28,600 21,800 6,200 8,160
Material requisitions and maintenance hours in the period are budgeted to be as follows:
Material Requisitions Maintenance hours
PCC1 300 800
PCC2 200 90
What is the total budgeted overhead in PCC2 after re-apportionment of service cost centre
overheads?
A. $25,105
B. $29,360
C. $35,400
D. $36,160

7. A company has two production cost centres, M and L. M absorbs overheads on the basis of
machine hours and L absorbs overheads on the basis of labour hours. The following information
is available for the next period:
Cost centre M L
Allocated and apportioned production overheads $400,000 $600,000
Direct labour hours 50,000 150,000
Machine hours 80,000 30,000
Job ABC will require four machine hours and three labour hours in each of the two production
cost centres. How much production overhead will be absorbed by job ABC?
A. $44
B. $64
C. $32
D. $31

8. Which of the following would NOT be a service cost centre in a manufacturing business?
A. Materials store
B. Marketing
C. Machining
D. Dispatch

9. Question#9: Overheads in production cost centre X are absorbed on the basis of machine hours
using a predetermined rate. Budget and actual data for the cost centre for a period are:
 Overheads Questions
Budget ($) Actual ($)

Overheads 72,000 74,400

Machine hours 5,000 4,800.

What is the amount of overheads absorbed in the period?

A. $69,120
B. $74,400
C. $77,500
D. $71,424

10. Question#10: Is each of the following statements about absorption costing true or false?
i. True False
Cost absorption is the process of sharing common costs among cost centres
Cost allocation is the process of charging whole cost items to cost centres

11. Question#11: Which of the following is the most appropriate basis for apportioning the canteen
costs in a factory?
A. Number of factory employees
B. Indirect labour hours
C. Direct labour hours
D. Direct wages

12. Question#12: The following indirect costs were incurred in a factory in a period:
Rental of premises $80,000
Utilities $25,000
There are two cost centres, A and B, in the factory which between them occupy the 20,000
square metres (sq m) of floor space (cost centre A, 8,000 sq m; cost centre B, 12,000 sq m).
What is the total indirect cost apportionment to cost centre B in the period if floor space is used
as the basis of apportionment?
A. $42,000
B. $52,500
C. $63,000
D. $105,00

13. Question#13: What is the charging of an overhead cost directly to a cost centre known as?
A. Overhead absorption
B. Overhead allocation
C. Overhead apportionment
D. Overhead assignment
 Overheads Questions

14. Question#14: Why is the process of cost apportionment carried out?

A. Costs may be controlled
B. Cost units gather overheads as they pass through cost centres
C. Whole items of cost can be charged to cost centres
D. Common costs are shared among cost centres

15. Question#15: What would be the most appropriate basis for apportioning the insurance costs of
plant and machinery to departments within a factory?
A. Floor space (m2) occupied by each department
B. Number of employees in each department
C. Number of machines in each department
D. Value of machines in each department

16. Question#16: A company uses an overhead absorption rate of $24 per machine hour which was
calculated using 80,000 budgeted machine hours for the period. During the same period actual
total overhead expenditure was $2,100,000 and 84,000 machine hours were recorded on actual
production. What was the total overhead under or over absorbed in the period?
A. $180,000 under absorbed
B. $96,000 over absorbed
C. $84,000 under absorbed
D. $80,000 over absorbed

17. Question#17: For which TWO of the following production overhead costs would 'floor area
occupied' be a suitable basis of apportionment?
A. Heating
B. Equipment depreciation
C. Factory rent
D. Stationery

18. Question#18: A company absorbs production overheads on a machine hour basis. The following
data relates to last year:
Budget Actual
Machine hours 2,500 2,400
Total production overheads ($) 50,000 47,000
What was the total over or under absorption of production overheads last year?
A. $1,000 over absorbed
B. $2,000 under absorbed
C. $3,000 under absorbed
D. $3,000 over absorbed
 Overheads Questions
19. Question#19: One of the products that a factory makes spends 3 machine hours in the assembly
department and 2 labour hours in the packaging department. The overhead absorption rates for
each department are as follows
Assembly $2.66 per machine hour
Packaging $1.75 per labour hour
What is the total amount of overhead to be absorbed into the cost of the product?
A. $4.41
B. $8.82
C. $10.57
D. $11.48

20. What is the order by which overheads are charged to the cost unit?
A. Absorb, Allocate, Apportion and Re-apportion.
B. Allocate, Apportion, Absorb and Re-apportion.
C. Allocate, Apportion, Re-apportion and Absorb.
D. Absorb, Re-apportion, Apportion and Allocate.

21. A company has the following budgeted and actual information:

22. 23. Budget 24. Actual
25. Production Overhead 26. $50,000 27. $60,000
28. Labor Hours 29. 12,500 30. 13,600

What is the amount of under-/over-absorption?

A. $10,000 Over-absorption.
B. $10,000 Under-absorption.
C. $5,600 Over-absorption.
D. $5,600 Under-absorption.

22. A company has the following information regarding two departments:

Dept X Dept Y
Production Overhead $100,000 $120,000
Machine Hours 20,000 12,000
Labor Hours 5,000 20,000

Calculate the appropriate overhead absorption rate for each of the departments:

31. Department X Department Y

32. A. $20/labor hour $6/labor hour
33. B. $5/machinehour $10/machinehour
34. C. $20/laborhour $10/machinehour
35. D. $5/machinehour $6/labor hour
 Overheads Questions

23. A company has the following information regarding overhead costs:

Overhead Cost $
Rent and Rates 25,000
Machine Depreciation 100,000
Canteen Costs 45,000

Other information:

Production Departments Service Departments

A B X Y
Floor Area (m2) 5,000 4,000 3,000 500
MachineHours 36. 22,500 37. 15,000 38. 2,000 39. 500
No.of Employees 120 80 15 10

How much is apportioned to Production Department A:

A. $4,250
B. $15,000
C. $61,500
D. $90,250

24. We know the following information regarding department X:

The actual overhead incurred was $23,500 and the actual labor hours worked were 2,000. We
originally budgeted 2,400 labor hours to be worked. The under-absorption is $3,500.
What is the budgeted overhead cost?
A. $16,000
B. $20,000
C. $24,000
D. $25,000

25. Canberra has established the following information regarding fixed overheads for the coming
month:
Budgeted information:

Fixed overheads: $180,000

Labour hours: 3,000 hours

Machine hours: 10,000 hours
Units of production: 5,000 units
Actual fixed costs for the last month were $160,000.
Canberra produces many different products using highly automated manufacturing processes
and absorbs overheads on the most appropriate basis.
 Overheads Questions
What will be the pre-determined overhead absorption rate?

A. $16
B. $18
C. $36
D. $60
26. A company has over absorbed fixed production overheads for the period by $6,000. The fixed
production overhead absorption rate was $8 per unit and is based on the normal level of activity of
5,000 units. Actual production was 4,500 units.
What was the actual fixed production overheads incurred for the period?
A. $30,000
B. $36,000
C. $40,000
D. $42,000
27. An organization absorbs overheads on a machine hour basis. The planned level of activity for last
month was 30,000 machine hours with a total overhead cost of $247,500. Actual results showed
that 28,000 machine hours were recorded with a total overhead cost of $238,000.

What was the total under-absorption of overheads last month?

A. $7,000
B. $7,500
C. $9,500
D. $16,500

28. A company has under-absorbed production overheads by $3,000 for a period. Overheads are
absorbed on a machine hour basis where the budgeted level of activity was 2,500 machine hours.
Actual machine hours were 2000.
Actual overheads incurred were $19,000.
What is the budgeted overhead cost?
$__________

29. The following budgeted activity relates to Production Departments A and B:

Department A Department B
Production Overheads $500,000 $350,000
Machine Hours 40,000 25,000
Labor Hours 20,000 30,000
Number of Units 50,000 35,000

What are the appropriate overhead absorption rates for each department?

B. Department A Department B
C. A. $12.50/MachineHour $14.00/MachineHour
D. B. $25.00/Labor Hour $11.67/Labor Hour
E. C. $12.50/MachineHour $11.67/Labor Hour
 Overheads Questions
F. D. $25.00/Labor Hour $14.00/MachineHour

30. A cost center has an overhead absorption rate of $4.25 per machine hour, based on a budgeted
activity level of 12,400 machine hours.
In the period covered by the budget, actual machine hours worked were 2% more than the
budgeted hours and the actual overhead expenditure incurred in the cost center was $56,389.
What was the total over- or under-absorption of overheads in the cost center for the period?
A. $1,054 over-absorbed
B. $2,635 under-absorbed
C. $3,689 over-absorbed
D. $3,689 under-absorbed

31. A manufacturing company uses a machine hour rate to absorb production overheads, which were
budgeted to be $130,500 for 9,000 machine hours.
Actual overheads incurred were $128,480 and 8,800 machine hours were recorded.
What was the total under-absorption of production overheads?
A. $880
B. $900
C. $2,020
D. $2,900

32. An organization absorbs overheads on a machine hour basis. The planned level of activity for
last month was 30,000 machine hours with a total overhead cost of $247,500. Actual results
showed that 28,000 machine hours were recorded with a total overhead cost of $238,000.
What was the total under absorption of overheads last month?
A. $7,000.
B. $7,500.
C. $9,500.
D. $16,500.

33. What term is used to describe charging an item of overhead expenditure in its entirely to one
specific cost centre?
a) Absorption
b) Allocation
c) Apportionment
d) Re-apportionment
34. What would be the most appropriate basis for apportioning machinery insurance cost to cost
centers within a factory?
a) Floor space occupied by the machinery
b) Number of machines
c) Operating hours of machinery
d) Value of machinery
35. The following data is available for the machining department cost center for the latest period:
Budget Actual
Production Overheads $128,000 $132,000
 Overheads Questions
Direct labor hours $25,000 25,600
What is the budgeted direct labor hour absorption rate for overheads?
a) $5.00 per direct labor hour
b) $5.12 per direct labor hour
c) $5.16 per direct labor hour
d) $5.28 per direct labor hour

36. The following data is available for a production department cost center for the latest period.
Budget Actual
Production Overheads $128,000 $132,000
Direct labor hours 25,000 25,600
What is the under/over absorbed production overhead for the period?
a) $8,160 under absorbed
b) $8,160 over absorbed
c) $12,000 under absorbed
d) $12,000 over absorbed
37. A cost center has an overhead absorption rate of $4.25 per machine hour, based on a budget
activity level of 12,400 machine hours.
In the period covered by the budget, actual machine hours worked were 2% more than the
budgeted hours and the actual overhead expenditure incurred in the cost center was $56,389
What was the total over or under absorption in the cost center for the period?
a) $1,054 over absorbed
b) $2,635 under absorbed
c) $3,689 over absorbed
d) $3,689 under absorbed
38. A business has two production cost centers, A and B and one service cost center, the
warehouse. The rent and rates expense for the business and is anticipated to be $25,000 for the
coming year. The floor space occupied by each cost center in square meters is as follows:
Cost Center A 1,200 sq m
Cost Center B 1,800 sq m
Warehouse 2,000 sq m
How much of the rent and rates expense should be apportioned to cost center B?
A) $6,000
B) $9,000
C) $10,000
D) $25,000

39. The process of allocation and apportionment of production overheads has been carried out for a
business with the following totals calculated:
Production Cost Centers Service Cost Centers
A B Canteen Stores
 Overheads Questions
$ $ $ $
Allocated and apportioned overhead 24,600 32,400 18,500 8,200
The production cost centers have the following details:
Production Cost Centers

A B
Number of employees 100 150
Number of Material Acquisition 60 104
What is the total overhead for production cost center B after reapportionment of the services
cost center overheads?
A) $10,400
B) $16,300
C) $35,000
D) $48,700
40. A business has two production cost centers, manufacturing and packaging the overheads and
other detail for these cost centers are as follows:
Manufacturing packaging
Overheads $154,000 $89,000
Labor hours 110,000 68,000
Machine hours 35,000 60,000
Management have decided that the overheads are to be absorbed on the basis of labor hours in
the manufacturing department and on the basis of machine hours in the packaging department
What is the overhead absorption rate per hour in each department (to the nearest cent)?
Manufacturing Packaging
$1.40 $1.31
$1.40 $1.47
$4.40 $1.31
$4.40 $1.48
41. What is the name given to the costing method where the cost of goods sold and the value of
closing inventory include an element of indirect costs or overheads?
a) Absorption costing
b) Allocation costing
c) Apportionment costing
d) Activity based costing
42. Which one of the following is the formula for calculating an overhead absorption rate?
a) Actual activity level ÷ budgeted total overhead
b) Budgeted activity level ÷ budgeted total overhead
c) Budgeted total overhead ÷ budgeted activity level
d) Budgeted total overhead ÷ actual activity level
43. H Co bases its overhead absorption rate on labor hours. The following information is available
for 20X9
Budgeted overheads 600,000
 Overheads Questions
Actual overheads 660,000
Budgeted labor hours 120,000
Actual labor hours 110,000

Calculated the over or under absorption of overheads for 20X9

a) $60,000 over – absorbed
b) $60,000 over – absorbed
c) $110,000 over – absorbed
d) $110,000 under – absorbed

44. What is an overhead absorption rate used for?

a) Share out common cost over benefiting cost centers
b) Find the total overheads for a cost center
c) Charge overheads to products
d) Control overheads
45. A cost center has an overhead absorption rate of $4.25 per machine hour, based on a budgeted
activity level of 12,400 machine hours
In the period covered by the budget actual machine hours worked were 2% more than the
budgeted hours and the actual overhead expenditure incurred in the cost centre was $56,389
What was the total over or under absorption of overheads in the cost centre for the period ?
A) $1,054 over absorbed
B) $2,635 under absorbed
C) $3,689 over absorbed
D) $3,689 under absorbed
46. Which of the following situations would cause overheads to be over-absorbed ?
a) When absorbed overheads exceed actual overheads
b) When absorbed overheads exceed budgeted overheads
c) When actual overheads exceed budgeted overheads
d) When budgeted overheads exceed absorbed overheads
47. A law firm recovers overheads on chargeable consulting hours. Budgeted overheads were
$615,000 and actual consulting hours were 32,150. Overheads were under-recovered by
$35,000. Actual overheads were $694,075
What is the budgeted overhead absorption rate per hour (to 2 decimal places)?
a) $20.21
b) $20.50
c) $21.59
d) $22.68
48. A finishing department absorbs production overheads using a direct labor hour basis budgeted
production overheads for the year just ended were $268,800 for the department and actual
production overhead cost were $245,600
 Overheads Questions
If actual labor hours worked were 45,000 and production overheads were over-absorbed by
$6,400. What was the overhead absorption rate per labor hour?
a) $5.32
b) $5.60
c) $5.83
d) $6.12
49. The following budgeted and actual results relate to production activity and overhead costs in
WX
Budget Actual
Production overhead costs
Fixed $36,000 $39,000
Variable $9,000 $12,000
Direct labor hours worked 18,000 hours 20,000 hours
An absorption costing system is used and production overhead cost are absorbed into output
cost on a direct labor hour basis
What is the total production overhead (both fixed and variable) during the period?
a) Over- absorbed by $1,000
b) Under-absorbed by $1,000
c) Under- absorbed by $5,000
d) $under-absorbed by $6,000
50. A company absorbs overheads on the basis of machine hours which were budgeted at 11,250
with overheads of $258,750. Actual results were 10,980 hours with overheads of $254,692.
Overheads were:
a) Under absorbed by $2,152
b) Over absorbed by $4,058
c) Under absorbed by $4,058
d) Over absorbed by $2,152

51. The management accountant of Gympie Limited has already allocated and apportioned the fixed
overheads for the period although she has yet to reapportion the service center costs.
Information for the period is as follows:

Production Departments Service Departments Total

1 2 Stores Maintenance
Allocated and apportioned $17,500 $32,750 $6,300 $8,450 $65,000
Work done by:
Stores 60% 30% 10%
Maintenance 75% 20% 5%

What are the total overheads included in production department 1 if the reciprocal method is used
to reapportion service center costs?
A $27,618.
B $28,171.
 Overheads Questions
C $28,398.
D $28,453.

52. A factory consists of two production cost centres (P and Q) and two service cost centres (X and
Y). The total allocated and apportioned overhead for each is as follows:
P Q X Y
$95,000 $82,000 $46,000 $30,0000

It has been estimated that each service cost center does work for the other cost centres in the
following proportions:
P Q X Y
Percentage of X allocation 40 40 - 20
Percentage of Y allocation 30 60 10 -

After the reapportionment of service cost center costs has been carried out using a method that
fully recognizes the reciprocal service arrangements in the factory, what is the total overhead for
production cost center P?
A $122,400.
B $124,716.
C $126,000.
D $127,000.
53. The following fixed overheads have been allocated and apportioned for a given period:
Production Departments Service Departments
A B C X Y
Costs allocated and apportioned 15,750 18,500 12,00 15,000 16,500
0
Work done by:
Service Department X 40% 30% 20% 10%
Service Department Y 50% 20% 15% 15%%

What are the total overheads for Production Department В if the reciprocal method is used to re-
apportion Service Departments X and Y?
A $26,600
B $18,289
C $27,477
D $31,983