Fixed overhead costs must be unitized for:
A)financial reporting purposes
B)planning purposes
C)calculating the production-volume variance
D)Both A and C are correct.

Question

Quizplus · Accepted Answer

Fixed overhead costs must be unitized or allocated on a per-unit basis for financial reporting purposes as it is required by accounting standards to report the total cost of goods sold and inventory valuation. Additionally, fixed overhead costs are used to calculate the production-volume variance, which measures the difference between the actual fixed overhead incurred and the budgeted fixed overhead for a certain production volume. Therefore, both A and C are correct. Planning purposes may also require unitization of fixed overhead costs but are not a primary reason.

Fixed Overhead Costs Must Be Unitized For