How should variable overhead costs incurred to self-construct an asset be recorded?
A) They should be included in the cost of the asset.
B) They should be assigned to the cost of inventory production.
C) They should be written off as a loss for the period.
D) They should be recorded as a one-time special assessment in a separate asset account.

Question

Quizplus · Accepted Answer

Variable overhead costs incurred to self-construct an asset should be included in the cost of the asset. This is in accordance with the capitalization principle under Generally Accepted Accounting Principles (GAAP), which requires all costs incurred to produce an asset, including overhead costs, to be capitalized as part of the asset's cost.

How Should Variable Overhead Costs Incurred to Self-Construct an Asset