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.

Question

Quizplus · Accepted Answer

Under absorption costing, fixed overhead costs are included in the cost of inventory and thus capitalized.

Note: B is incorrect because fixed overhead costs are expensed under variable costing. C is incorrect because variable overhead costs can be either expensed or included in inventory, depending on the costing method used. D is incorrect because selling costs are not considered part of overhead, but rather a separate category of expenses.

Which Statement Is Correct About Overhead