Variable overhead is the portion of total overhead that varies with production volume. Variable overhead includes costs such as direct labor, raw materials, and commissions. These costs increase as production volume increases.
What are the different types of overheads as per functional classification? As per functional classification, there are four different types of overheads:
1. Manufacturing overheads: These are the costs incurred in the manufacturing process, such as raw materials, labour, etc.
2. Selling and administrative overheads: These are the costs incurred in the selling and administrative functions of the business, such as salaries, rent, etc.
3. Research and development overheads: These are the costs incurred in the research and development activities of the business.
4. Financing overheads: These are the costs incurred in the financing activities of the business, such as interest on loans, etc. What is overhead also known as? Overhead, also known as indirect costs, are those costs that cannot be directly attributed to the production of a specific good or service. Overhead includes expenses such as rent, utilities, insurance, and office supplies.
What are the classifications of overhead? The two main classifications of overhead are direct overhead and indirect overhead. Direct overhead includes costs that can be directly traced to the production of a good or service, while indirect overhead includes costs that cannot be directly traced to the production of a good or service.
What are examples of variable costs? There are many examples of variable costs, but some common ones include:
1. Raw materials - the cost of the materials used to produce a product
2. Labor - the cost of the labor used to produce a product
3. Shipping - the cost of shipping a product to its customer
4. Advertising - the cost of advertising a product
Is variable production overhead a prime cost?
There is no definitive answer to this question as it depends on how your particular business defines and classifies its costs. However, in general, variable production overhead would not be considered a prime cost as it is not directly related to the production of the finished product. Prime costs are typically defined as those costs that are directly related to the production process and are variable in nature, such as raw materials and direct labor.