PLEASE REPLY TO EACH CLASSMATE. New Post by Jeremiah Gadson Overhead costs are

New Post by Jeremiah Gadson
Overhead costs are costs produced from
indirect costs, materials, labor, that do not go into the finished product.
This can influence management decisions in the sense that management would want
to control overhead costs since they do not directly influence the finished
product. To associate to a normal household, most people have a set temperature
on the thermostat during both the summer and winter. The main reason household
do this is to reduce the cost of the electricity bill. The same is true for
companies, they want to ensure overhead costs are within control. If adding a
new product to the factories production process added a severe amount of
overhead, it would make managers hesitant to finalize the decision. Managers
have to consistently keep costs such as overhead costs in mind even when it
seems the decision may not affect the overhead. Due to the nature of overhead,
it is impossible for a decision to not have an impact on it (Warren, Reeve,
& Duchac, 2017).
Warren, C. S., Reeve, J. M., & Duchac, J. (2017). Managerial
Accounting. [VitalSource Bookshelf].
New Post by Bryanna Young
5 days ago
Re: ***REPLY HERE***
When it comes to making management decisions there are many
different factors that play a role, one being overhead costs. Overhead costs
help companies set prices because the overhead costs do not depend on just the
direct costs, the overhead costs play a major role as well. Overhead costs also
play a special role in meeting regulatory requirements. US GAAP wants all
manufacturing costs to comply, those costs include direct material, direct
labor, and overhead costs. It is very important to monitor the overhead costs
because even though they are not directly related to pricing, if the cost
increases you are losing profit. Lastly, the overhead costs play a role in
preparing the holistic budget. While estimating the overhead costs is
difficult, this means the overhead costs cannot be attributable to a product
directly. Therefore, the overhead costs are allocated to the products later on.
If the overhead costs can be estimated correctly, then the budget can be
prepared in an efficient and reliable way.