66. Which two costs would be used to calculate inventory overhead?
Answer: A,D
Production employee benefits and factory electricity costs are used to calculate inventory overhead.
Inventory overhead includes costs that are directly associated with the production process. This means that production employee benefits and factory electricity costs are integral to determining the overall cost of producing inventory.
A) Production employee benefits
Production employee benefits are a key component of inventory overhead because they are costs directly tied to the workforce involved in manufacturing goods. These benefits, which may include health insurance, retirement plans, and paid leave, are essential for maintaining production capacity and are thus allocated to inventory costs.
B) Administrative employee benefits
Administrative employee benefits do not contribute to inventory overhead, as they pertain to costs associated with administrative functions rather than production. These costs are typically categorized as selling, general, and administrative expenses, which are not directly involved in the creation of inventory.
C) Administrative office electricity costs
Similar to administrative employee benefits, administrative office electricity costs are not included in inventory overhead calculations. This type of expense is associated with the general operations of the company rather than the manufacturing process, and therefore does not impact the cost of inventory directly.
D) Factory electricity costs
Factory electricity costs are classified as inventory overhead because they are necessary for running the production facilities. This includes the electricity required to power machinery and equipment that directly contribute to the manufacturing of products, making it a relevant cost in calculating inventory.
Conclusion
Production employee benefits and factory electricity costs are essential for calculating inventory overhead as they directly relate to the production process. In contrast, administrative employee benefits and administrative office electricity costs do not affect inventory costs, as they are not tied to manufacturing operations. Therefore, options A and D are the correct choices for determining inventory overhead.