What Is the Most Common Treatment of the Fixed-Overhead Budget

question 22

Multiple Choice

What is the most common treatment of the fixed-overhead budget variance at the end of the accounting period?

• A) Reported as a deferred charge or credit.
• B) Allocated among Work-in-Process Inventory, Finished-Goods Inventory, and Cost of Goods Sold.
• C) Charged or credited to Cost of Goods Sold.
• D) Allocated among Cost of Goods Manufactured, Finished-Goods Inventory, and Cost of Goods Sold.
• E) Charged or credited to Income Summary.

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Definitions:

Consumer Division

A segment within a company focused on selling products and services directly to consumers, as opposed to business or commercial clients.

Break-even Sales

The amount of revenue needed to cover both the variable and fixed costs of a business, resulting in neither profit nor loss.

Absorption Costing

is an accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overhead) in the cost of a product.

Unit Product Cost

The total cost (including materials, labor, and overhead) to produce a single unit of a product.