Question: Accounting for Overhead Form groups of four to six persons. Each group should identify a cost accountant at a local company to interview. The interviewee could be the top financial officer of a small company, but a division controller or cost analyst might be more appropriate for a large company. The essential factor is that the person chosen understands how overhead costs are allocated to products or services in the company. Set up an interview with the cost accountant, and explore the following issues. Be prepared with follow-up questions if your question receives a superficial answer. Your goal should be to get as much operational detail as possible about the procedures used for allocating overhead costs at the company. If the company is large, you may want to focus on one department, one product line, or some other subdivision of the company. The issues to explore are as follows:
1. What types of costs are included in overhead? How large is overhead compared with direct materials and labor costs?
2. What types of overhead cost pools exist? Are there different pools by department? By activity? By cost-allocation base? By fixed or variable cost? Be prepared to explain what you mean by these terms because terminology varies widely.
3. How is overhead applied to final products or services? What cost-allocation bases are used? After the interview, draw a diagram of the cost application system in as much detail as possible. Be prepared to share this with the entire class, using it to explain the overhead cost application system at the company your group studied.