Question

Which of the following items is an example of an overhead expense?: (A)Rent on a factory. (B)Electricity, most of which is used to power a plant's machinery. (C)Raw materials used in manufacturing. (D)Shipping costs on goods sold. (Hint: Remember that overhead expenses are fixed costs, which must be paid regardless of the amount of business done.)

Answer 1

A, the rent. If confused between A and B, remember that electricity is a cost that can fluctuate over the amount of business, as well as C and D.