Overhead costs are traced to products in the same way that direct materials and direct labor are traced.

Question

Quizplus · Accepted Answer

Overhead costs are different from direct materials and direct labor as they cannot be easily traced to a specific product. They are allocated to products based on a predetermined overhead rate, which is calculated by dividing the total estimated overhead costs by the estimated activity level. This allocation is done using indirect cost allocation methods such as activity-based costing, job order costing, or process costing.

Overhead Costs Are Traced to Products in the Same Way