For purposes of allocating fixed overhead costs to products, managers may view the fixed overhead costs as if they had a variable-cost behavior pattern.

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This approach is called activity-based costing and involves assigning fixed overhead costs to products based on the activities (or cost drivers) that cause those costs to be incurred. This means that the more of a certain activity a product requires, the more fixed overhead costs that product will be assigned. In a way, this treats fixed overhead costs as if they were variable, because they are now being assigned based on the level of activity that necessitates them.

For Purposes of Allocating Fixed Overhead Costs to Products, Managers