When a company uses a allocation rate there is only one base for allocating all overhead costs to products or other cost objects is companywide allocation rate.
The expenditures involved in running a firm that aren't related to developing or manufacturing a good or service are known as overhead costs, often known as overhead or operating expenses. They are the costs a business must pay to remain open, regardless of how successful it is.
Indirect costs, such as rent, utilities, insurance, and salaries for office workers and supplies, are referred to as overhead costs since they are not directly tied to the production activity. Overhead costs must be paid even if there is no production.
Since these expenses are not directly related to a specific business activity and do not contribute to the creation of profits, they are classified as overhead expenditures.
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