A Basic Tenet of Variable Costing Is That Fixed Manufacturing

question 84

Multiple Choice

A basic tenet of variable costing is that fixed manufacturing overhead costs be currently expensed. What is the rationale behind this?

• A) Fixed manufacturing overhead costs occur regardless of level of production.
• B) Fixed manufacturing overhead costs are generally immaterial in amount.
• C) Allocation of fixed manufacturing costs are arbitrary at best.
• D) Fixed manufacturing costs change as production changes.

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Definitions:

Cost

An amount that must be paid or spent to buy or obtain something, covering expenses such as manufacturing, labor, or materials.

Benefit

The advantage or profit gained from something, often used in the context of weighing costs against benefits in decision-making processes.

Freely Functioning Market

A market where goods and services are traded without any restrictions or interventions from governments.

Government Intervention

Actions taken by a government to affect the economy, which can include regulations, subsidies, tariffs, and taxes.