Companies have often produced significant amounts of excess inventory because of
A)variable overhead allocation methodologies.
B)fixed overhead allocation methodologies.
C)variable and fixed overhead allocation methodologies.
D)the financial accounting requirement to expense research and development as incurreD.

Question

Quizplus · Accepted Answer

Fixed overhead allocation methodologies allocate costs to products based on predetermined overhead rates, regardless of the actual amount of overhead incurred. This can result in excess inventory if the predetermined overhead rates are too high, leading to more overhead being allocated to products than was actually incurred. Variable overhead allocation methodologies are based on actual overhead incurred, so they are less likely to result in excess inventory. The financial accounting requirement to expense research and development as incurred is not directly related to excess inventory.

Companies Have Often Produced Significant Amounts of Excess Inventory Because