Multiple Choice
In a process costing system, how many Work in Process (WIP) accounts does each department typically use?
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1. Introduction to Accounting
Types of Accounting
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All of the following are types of activities that cause overhead except:
A
Batch-level activities
B
Direct material acquisition
C
Unit-level activities
D
Product-level activities
Verified step by step guidance1
Understand the concept of overhead: Overhead refers to indirect costs incurred during production or operations that cannot be directly traced to a specific product or service. Examples include utilities, rent, and salaries of supervisors.
Review the types of activities that cause overhead: These include batch-level activities (costs incurred for a batch of products), unit-level activities (costs incurred for each unit produced), and product-level activities (costs incurred to support a specific product line).
Identify the exception: Direct material acquisition is not considered overhead because it is a direct cost. Direct costs are directly traceable to the production of specific goods or services, unlike overhead costs.
Compare the options: Batch-level, unit-level, and product-level activities all contribute to overhead, while direct material acquisition does not.
Conclude the reasoning: The correct answer is direct material acquisition because it is a direct cost and does not fall under the category of overhead activities.
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