A. When overtime must be worked, the premium (this is the amount that the wage increases for overtime work) that is paid to the workers for the overtime is usually considered to be factory overhead. However, if the need to work overtime is the result of a specific job or customer request, the premium should be charged to that specific job and not included in the overall overhead amount to allocate. Hence, in most cases overtime premiums are included in overhead costs.

B. Materials price variances are usually closed to the cost of goods sold or to the cost of goods sold and work-in-process on pro-rata basis.

C. Prime costs are the costs of direct material and direct labor. These are the direct inputs and are not included in overhead costs.

D. Abnormal spoilage is all spoilage in excess of the normal level of spoilage. The costs that have been allocated to the abnormal spoiled units will be expensed on the income statement in that period as a loss from abnormal spoilage. Thus, abnormal spoilage is not included in the overhead costs.