For product-costing purposes,which of the following statements is true?
A)It is necessary to "unitize" fixed overhead costs,under the absorption or full-costing approach.
B)The amount of standard fixed overhead costs for product-costing and control purposes is the same.
C)Only standard variable overhead costs are included since these costs change in response to cost drivers.
D)Standard costing is not permissible under generally accepted accounting principles.
E)Total fixed overhead costs are applied as a "lump-sum" amount.

Question

Quizplus · Accepted Answer

Fixed overhead costs cannot be easily traced to individual units of production, so they must be allocated or unitized to products. This is done under the absorption or full-costing approach, where fixed overhead costs are allocated based on a predetermined rate per unit of activity, such as machine hours or direct labor hours. Therefore, it is necessary to unitize fixed overhead costs for product-costing purposes. Option B is incorrect because the amount of standard fixed overhead costs for product-costing purposes can be different from the actual amount incurred for control purposes. Option C is incorrect because both variable and fixed overhead costs are included in product costing. Option D is incorrect because standard costing is a widely accepted practice in accounting. Option E is incorrect because total fixed overhead costs are unitized to products, not applied as a lump-sum amount.

For Product-Costing Purposes,which of the Following Statements Is True