Overallocated indirect costs occur when the allocated amount of indirect costs is greater than the amount incurred for that period.

Question

Quizplus · Accepted Answer

When the allocated amount of indirect costs exceeds the amount actually incurred, it means there has been an overallocation of indirect costs. This can happen due to various reasons, such as inaccurate cost estimation, changes in production volumes or activity levels, or errors in the allocation process. It results in an overstatement of the actual cost of production and can skew decision-making and budget planning.

Overallocated Indirect Costs Occur When the Allocated Amount of Indirect