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Assigning manufacturing overhead to product is complicated because it is an indirect cost many companies have large amounts of variable overhead it consists of many types of costs

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Brian

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Step 1/2

SOLUTION:

Assigning manufacturing overhead to products is complicated for several reasons, and one of the main reasons is that manufacturing overhead is an indirect cost. Unlike direct costs, such as direct materials and direct labor, manufacturing overhead includes various indirect costs that are not easily traceable to specific products.

Here are the reasons why assigning manufacturing overhead is complicated:

Explanation:

Manufacturing overhead consists of a variety of costs, including utilities, maintenance, depreciation, property taxes, and other indirect costs. Each of these costs may have different drivers or allocation bases, making the overall allocation process complex.

Step 2/2

Explanation:

`To` address these challenges, companies often use predetermined overhead rates, which are based on estimates of total overhead costs and expected activity levels. However, even with predetermined rates, assigning manufacturing overhead to products remains a complex task that requires careful consideration of various factors.

Final Answer

FINAL ANSWER:

Assigning manufacturing overhead to products is complicated because it is an indirect cost, involves variable overhead with fluctuating costs, and consists of diverse types of expenses that may require different allocation bases.

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