Assigning manufacturing overhead to a specific job is complicated by all of the below except:
A Manufacturing overhead consists of both variable and fixed costs.
B Manufacturing overhead is incurred only to support some jobs.
C Manufacturing overhead is an indirect cost that is either impossible or difficult to trace to a particular job.
D The average cost of actual fixed manufacturing overhead expenses will vary depending on how many units are produced in a period.
The correct answer and explanation is :
The correct answer is B: Manufacturing overhead is incurred only to support some jobs.
Explanation:
Manufacturing overhead (MOH) refers to all indirect costs associated with the production process that cannot be traced directly to a specific product or job. These costs typically include items such as factory utilities, equipment depreciation, indirect labor (e.g., supervisors or maintenance staff), and factory supplies. The process of assigning MOH to specific jobs becomes complicated because of several key factors, but let’s break down each option to understand why B is the exception:
- A: Manufacturing overhead consists of both variable and fixed costs.
- This statement is true. Manufacturing overhead includes both variable costs (such as utilities or indirect materials that fluctuate with production levels) and fixed costs (such as rent or equipment depreciation, which remain constant regardless of production volume). This mixture of costs complicates the allocation process, as the fixed costs do not change with the level of production, while variable costs do. Properly allocating both types of costs to specific jobs requires careful calculation to ensure accuracy.
- B: Manufacturing overhead is incurred only to support some jobs.
- This statement is incorrect because manufacturing overhead is not incurred for just some jobs—it supports the entire manufacturing process. The overhead costs are not directly traceable to any one job but are incurred to facilitate the entire production process. Therefore, it is not correct to say that overhead is only incurred for some jobs. Overhead is a general cost that applies to all jobs or products being produced within the factory.
- C: Manufacturing overhead is an indirect cost that is either impossible or difficult to trace to a particular job.
- This statement is true. Manufacturing overhead includes indirect costs that cannot be directly traced to a specific job. For example, electricity to run machinery or the cost of maintenance staff cannot be linked directly to one particular job, which makes it difficult to allocate these costs precisely to individual jobs.
- D: The average cost of actual fixed manufacturing overhead expenses will vary depending on how many units are produced in a period.
- This statement is true. While fixed costs themselves do not change with production levels, the average fixed cost per unit produced will vary depending on the total number of units manufactured in a given period. If fewer units are produced, the average fixed cost per unit increases, and vice versa.
In conclusion, B is the exception because manufacturing overhead supports all jobs, not just some. The other factors (A, C, and D) all describe complexities in assigning manufacturing overhead accurately to specific jobs.