Which Statement Is Correct About Overhead

question 21

Multiple Choice

Which statement is correct about overhead?

• A)Fixed overhead is capitalized under absorption costing.
• B)Fixed overhead is capitalized under variable costing.
• C)Variable overhead is always expensed.
• D)Selling costs are part of fixed overhead.

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Definitions:

Actual Purchase Price

Actual Purchase Price refers to the actual amount paid for goods or materials, including additional costs such as delivery charges and taxes.

Direct Material

Primary raw materials that can be specifically identified and directly charged to the manufacturing of a specific product.

Standard Quantity

This is the predetermined amount of materials or labor expected to be used in producing a unit of product or service.

Direct Material Price Variance

The difference between the actual cost of direct materials used and the expected (or standard) cost, which can indicate efficiency in purchasing materials.