Zett Company has been using FIFO process costing for tracking the costs of its manufacturing activities. But, in recent months, the system has become somewhat bogged down with details. It seems that, when the company purchased ABB Electronics last year, its product lines increased six-fold. This has caused both the accountants and the suppliers of the information, the line managers, great difficulty in keeping the costs of each product line separate. Likewise, the estimation of the completion of ending work-in-process inventories and the associated costs has become very cumbersome. The CFO of the company is looking for ways to improve the reporting system of product costs. What can you recommend to improve the situation?

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Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit.  Overhead expenses depend upon the nature of the business operations.