CMA Intermediate · Cost Accounting · Overheads
Which of the following is correctly classified as an administrative overhead rather than a factory overhead?
Audit fees are an administrative overhead because they relate to the overall management and control of the business, not to production. Depreciation of lathes, the works manager's salary and lubricating oil are all incurred in the factory and are factory overheads.
- ADepreciation of lathe machines
- BSalary of the factory works manager
- CAudit fees of the companyCorrect
- DLubricating oil used on machines
Explanation
Audit fees relate to the general direction and control of the whole organisation, so they are administrative overhead. The other three arise in the factory and are production overheads.
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