Out of the four different types of costs, how would you classify overhead costs? (Hint: Overhead costs are unavoidable costs a company must spend to produce any amount of outputs up to a certain level. There’s usually a threshold where the outputs exceed the maximum capacity which requires additional spending for every extra unit of outputs.)
1. Fixed cost
2. Semi-variable cost
3. Stepped fixed cost
4. Variable cost
Answers
Answer:
semi-variable cost
Explanation:
Overhead costs usually contains fixed costs such as manager salary and rent, but it also contains some variable costs such as electricity and utilities, therefore it is a semi-variable cost.
Answer:
If we consider the Overhead costs as those unavoidable costs that a company must spend to produce any amount of outputs up to a certain level and there’s a threshold where the outputs exceed the maximum capacity which requires additional spending for every extra unit of outputs, then this type of Overhead costs are Semi-variable cost as it has a fixed charge plus an additional cost based on the total usage.
Overhead costs can be classified as Fixed overheads Cost , Semi-variable cost and Variable Overheads Cost.
Explanation:
- Overheads are business costs that are related to the day-to-day running of the business or we can say it is what we pay to keep our business in business.
- It doesn’t include what we spend to produce goods or provide services which are called COGS (cost of goods sold) and COS (cost of services), respectively.
- Depending on the nature of the business and the industry it operates in, the overhead expenses also vary.
There are three types of overhead costs:.
- Fixed overheads
Fixed overheads are costs remain constant every month. This kind of overheads do not change with changes in business activity levels. Examples of fixed overheads : salaries, rent, property taxes, depreciation of assets etc.
- Variable overheads
Variable overheads vary with business activity levels and can increase or decrease with different levels of business activity.
Examples of variable overheads are shipping costs, office supplies, advertising and marketing costs, consultancy service charges, legal expenses etc.
- Semi-variable overheads
Semi-variable overheads possess characteristics of both fixed and variable costs.
Examples of semi-variable overheads are sales commissions, some utilities such as power and water costs which have a fixed charge plus an additional cost based on the total usage.
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