A basic tenet of variable costing is that fixed manufacturing overhead costs be currently expensed. What is the rationale behind this? A. Fixed manufacturing overhead costs occur regardless of level of production. B. Fixed manufacturing costs change as production changes. C. Allocation of fixed manufacturing costs are arbitrary at best. D. Fixed manufacturing overhead costs are generally immaterial in amount.

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Business

Emery

11 September, 03:29

A basic tenet of variable costing is that fixed manufacturing overhead costs be currently expensed. What is the rationale behind this? A. Fixed manufacturing overhead costs occur regardless of level of production. B. Fixed manufacturing costs change as production changes. C. Allocation of fixed manufacturing costs are arbitrary at best. D. Fixed manufacturing overhead costs are generally immaterial in amount.

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Trent Blackwell · Answer 1

C. Allocation of fixed manufacturing costs are arbitrary at best.

Explanation:

A. - Yes, fixed cost occurs regardless of the level of production, but that is true for every costing method, and some of them do calculate a unit rate for fixed overhead. the statment is partially true

B. - If fixed cost changes with the level of production then, are variable cost, not fixed. Statement is FALSE

C. The allocation of fixed manufacturing costs is arbitrary at best. This is the reasoning for variable costing to consider fixed cost expenses, the method of allocating cost, using a rate always generates a difference in applied and overapplied MO It generates distortions and is not objective, it is based on personal option. The use of direct labor hours, cost or machine hours is evidence of that. TRUE

D. - There is such a cost, like depreciation, but others do incur in cash disbursements, like rent, indirect materials, supervisors, maintenance cost and others. is Statment is FALSE