Under Absorption Costing and Variable Costing, How Are Fixed Manufacturing

question 96

Short Answer

Under absorption costing and variable costing, how are fixed manufacturing costs treated? $$\begin{array} { l l l } & \text { Absorption } & \text { Variable } \\\text { a. } & \text { Product Cost } & \text { Product Cost } \\\text { b. } & \text { Product Cost } & \text { Period Cost } \\\text { c. } & \text { Period Cost } & \text { Product Cost } \\\text { d. } & \text { Period Cost } & \text { Period Cost }\end{array}$$

Analyze the impact of dividend payments on stock value.

Evaluate investment decisions based on required rates of return.

Develop skills in financial calculation and analysis.

Understand the tools and components of fiscal policy.

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Definitions:

Overhead Cost

Overhead cost refers to ongoing business expenses not directly linked to creating a product or service, such as rent, utilities, and administrative costs.

Actual Overhead

The total real costs incurred for indirect materials, labor, and other expenses to operate a business, not directly tied to specific products or services.

Overhead Applied

Overhead applied is the portion of manufacturing overhead costs assigned to individual units of production based on a predetermined overhead rate.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to products based on a particular activity base.