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    Question

    Refer to the following information to answer the next 4 questions (Q15 to Q18) Overheads are indirect costs that cannot be directly traced to specific products or services but are necessary for the overall operations of a business. These costs include various types of expenses such as administration, production, selling, and distribution overheads. Each category of overheads plays a distinct role in the functioning of a business. Accurate classification and allocation of these overheads are crucial for effective cost accounting, enabling businesses to determine the true cost of their products and services and make informed financial decisions. Understanding how to allocate and manage these overheads helps in analyzing the profitability and efficiency of different segments of the business, ensuring better financial control and strategic planning. The process of cost allocation involves assigning costs to cost centers or cost units, ensuring that each segment of the business is charged with its relevant expenses. This helps in analyzing the profitability and efficiency of different segments of the business, ensuring better financial control and strategic planning. Overheads also impact financial accounting, as adjustments for under-absorption or over-absorption need to be made to reflect the actual costs incurred. Understanding how to manage these overheads aids in financial analysis, budgeting, and forecasting, ultimately contributing to the overall financial health and sustainability of the business.

     In the context of cost accounting, expenses are

    classified into different categories based on their function within the business operations. Based on your understanding of these categories, identify which one includes expenses related to warehouse:
    A Production Overheads Correct Answer Incorrect Answer
    B Selling Overheads Correct Answer Incorrect Answer
    C Distribution Overheads Correct Answer Incorrect Answer
    D None of the above Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

    Warehouse expenses are categorized under distribution overheads because they are related to the logistics and management of inventory storage and handling before the products are delivered to customers. This classification helps in accurately allocating costs to the appropriate segment of the business operations.

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