The Fixed Cost Per Unit of Activity Varies with Changes

question 151

True/False

The fixed cost per unit of activity varies with changes in volume.

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Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production based on a chosen allocation base such as labor hours or machine hours.

Manufacturing Overhead

Refers to all indirect costs associated with the production process, including but not limited to, utility costs, maintenance, and supplies that do not directly become part of the finished product.

Direct Labor-Hours

The total hours worked by employees who are directly involved in the production process of goods or services.

Activity-Based Costing

A pricing strategy that allocates indirect expenses and overheads to particular tasks associated with the manufacturing of products or services.