Overhead is related ideally to production using an allocation base.

Question

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Overhead costs are indirect costs that cannot be easily attributed to a specific product or service. To allocate these costs to specific products or services, an allocation base is used. This allocation base is typically a factor that is common to all products, such as direct labor hours or machine hours. By using this allocation base, overhead costs can be assigned to specific products or services in a way that reflects their actual usage of the production resources.

Overhead Is Related Ideally to Production Using an Allocation Base