A Basic Tenet of Variable Costing Is That Fixed Overhead

question 71

Multiple Choice

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

• A)Fixed overhead costs will occur whether or not production occurs and so it presents a clearer picture of how changes in production volume affect costs and income.
• B)Fixed overhead costs are generally immaterial in amount and the cost of assigning the amounts to specific products would outweigh the benefits.
• C)Allocation of fixed overhead costs is arbitrary at best and could lead to erroneous decisions by management.
• D)Fixed overhead costs are uncontrollable and should not be charged to a specific product.

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Definitions:

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A logical error that occurs when someone assumes that an exceptional case can represent the entirety of a situation, thereby making broad generalizations from a single, atypical instance.

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