If actual indirect cost rates were calculated monthly rather than annually, then for the month of February with only 28 days: A. Variable indirect cost rates would be lower B. Total indirect cost rates would be higher C. Fixed indirect cost rates would be lower D. Monthly output would be higher

Question

Business

Quinton Vaughn

8 November, 14:28

If actual indirect cost rates were calculated monthly rather than annually, then for the month of February with only 28 days: A. Variable indirect cost rates would be lower B. Total indirect cost rates would be higher C. Fixed indirect cost rates would be lower D. Monthly output would be higher

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Marques · Answer 1

Answer: Option B

Explanation:

Indirect costs are cost incurred by the company which does not involve in the production of the goods. Indirect costs are the salaries, wages, depreciation and maintenance costs. If the indirect costs are calculated on monthly basis then it would show a higher value for the month of February as there are only 28 days in this month.

Indirect costs are allocated according to the overhead costs. Indirect costs cannot be allocated based on the product or the service and they are completely taken as full for calculation. Indirect costs are segregated based on their utilities such as rent or salary.