Because fixed factory overhead cost in total does not vary with changes in output:
A) The amount used in the control budget for a period is a "lump-sum" amount.
B) There is no way to assign fixed overhead cost to products for product-costing purposes.
C) Most companies treat such costs as period, rather than as product costs.
D) There is no justification for fixed overhead cost application.
E) Generally accepted accounting principles permit companies to use variable rather than absorption (full) costing for external reporting purposes.

Question

Quizplus · Accepted Answer

Fixed factory overhead costs are constant in total regardless of the level of output, so they are budgeted as a lump-sum amount in the control budget. This allows for planning and control purposes without varying the budgeted amount with changes in production volume.

Because Fixed Factory Overhead Cost in Total Does Not Vary