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 are generally immaterial in amount.
B)Fixed manufacturing overhead costs occur regardless of level of production.
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 costs that do not vary with the level of production. Therefore, they are considered period costs and are currently expensed in the period incurred rather than being allocated to the cost of goods sold. This method provides a more accurate view of the true cost of production and helps management make more informed decisions about pricing and profitability.

A Basic Tenet of Variable Costing Is That Fixed Manufacturing