Because Fixed Factory Overhead Cost in Total Does Not Vary

question 45

Multiple Choice

Because fixed factory overhead cost in total does not vary with changes in output:

• A) The amount used in the control budget for a period is a "lump-sum" amount.
• B) There is no way to assign fixed overhead cost to products for product-costing purposes.
• C) Most companies treat such costs as period, rather than as product costs.
• D) There is no justification for fixed overhead cost application.
• E) Generally accepted accounting principles permit companies to use variable rather than absorption (full) costing for external reporting purposes.

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Definitions:

Two-Tiered Wage

A pay scale system that offers a higher wage tier for current employees and a lower wage tier for new hires for the same job.

Monopoly Power

The ability of a single seller to influence the price and production levels in the market.

Labor Union

An organization of workers formed to protect and advance their interests, including wages, benefits, and working conditions.

Bilateral Monopoly

A market situation where there is only one buyer (monopsony) and one seller (monopoly), negotiating terms of exchange or price.