Explain How Fixed Costs Impact the Decision to Where to Locate

question 12

Essay

Explain how fixed costs impact the decision to where to locate a plant.

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Definitions:

Overhead Cost

The ongoing expense of operating a business that is not directly associated with the production of goods or services, such as rent, utilities, and office supplies.

Predetermined Overhead Rates

Rates used to allocate manufacturing overhead to products based on a predetermined formula, often involving estimated costs and activity levels.

Activity Cost Pools

Aggregations of all the costs associated with a particular activity or process, used in activity-based costing.

Underapplied Overhead

A debit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost actually incurred exceeds the amount of overhead cost applied to Work in Process during a period.