Assume That the Predetermined Fixed Overhead Rate Per Unit Remains

question 9

Multiple Choice

Assume that the predetermined fixed overhead rate per unit remains the same from 2007 to 2008 and inventory decreases in 2008. Which of the following statements is true?

• A) The fixed overhead expended in 2008 under variable costing will be greater than that expended under absorption costing.
• B) The fixed overhead expended in 2008 under absorption costing will be greater than that expended under variable costing.
• C) The amount of fixed overhead expended will be the same under both methods.
• D) It is impossible to determine what effect the decrease in inventory will have on net profit under absorption costing.

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