Fixed Costs Expressed on a Per Unit Basis

question 22

Multiple Choice

Fixed costs expressed on a per unit basis

• A)will react directly with changes in activity.
• B)will react inversely with changes in activity.
• C)are not affected by activity.
• D)should be ignored in making decisions since they cannot change over the long run.

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Definitions:

Activity Base

A measure used for allocating costs to a product or service, typically based on the extent to which the product or service uses that activity.

Predetermined Overhead Rate

An estimated rate used to assign overhead costs to products or job orders, based on a particular activity base, before the actual costs are known.

Underapplied Overhead

A condition where the allocated manufacturing overhead is less than the actual overhead costs incurred, leading to a shortfall.

Overapplied Overhead

Occurs when the allocated manufacturing overhead costs for a period exceed the actual overhead costs incurred.