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 overhead costs are generally immaterial in amount.
C)Allocation of fixed manufacturing costs are arbitrary at best.
D)Fixed manufacturing costs change as production changes.

Question

Quizplus · Accepted Answer

Fixed manufacturing overhead costs are incurred even if no production takes place. Therefore, expensing these costs in the period they occur provides a more accurate representation of the cost of production during that period. Using absorption costing, which allocates fixed overhead costs to units produced, can distort the cost of production in periods of low or high production levels.

A Basic Tenet of Variable Costing Is That Fixed Manufacturing