Which of the following is TRUE about fixed overhead cost?
A)Fixed overhead cost should be unitised for planning purposes.
B)Fixed overhead costs are unaffected by the degree of operating efficiency in a given budget period.
C)Fixed overhead costs never have any unused capacity.
D)Both A and B are correct.

Question

Quizplus · Accepted Answer

Fixed overhead costs are predetermined expenses that do not vary with the level of output or efficiency. Therefore, they remain unaffected by changes in operating efficiency. Option A is incorrect because unitizing fixed overhead cost for planning purposes is subjective and depends on the specific circumstances of each business. Option C is incorrect because fixed overhead cost may have unused capacity if the actual output is lower than the budgeted output.

Which of the Following Is TRUE About Fixed Overhead Cost