Which of the Following Statements Is True About Overhead

question 42

Multiple Choice

Which of the following statements is true about overhead?

• A) Overhead costs are not incurred uniformly throughout the year.
• B) Overhead costs have a definite, identifiable relationship with units produced.
• C) Low production in one month would give rise to low unit overhead costs.
• D) All of these are correct.
• E) None of these are correct.

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Definitions:

Variable Cost

Costs that change in proportion to the level of production or activity.

Operating Leverage

Refers to the extent to which fixed costs are used in a company's operations; high operating leverage means a larger proportion of fixed costs, leading to greater potential for profit variability with changes in sales volume.

Pretax Net Income

The amount of income that a company has earned before any taxes have been deducted.

CVP Analysis

Cost-Volume-Profit Analysis, a financial tool used to determine how changes in cost and volume affect a company's operating income and net income.