Fixed factory overhead costs appear on the absorption-costing income statements as ________.
A) a fixed expense
B) part of cost of goods sold
C) a production volume variance
D) part of cost of goods sold and a production volume variance

Question

Quizplus · Accepted Answer

Fixed factory overhead costs are included in the cost of goods sold under absorption costing, which is calculated by adding together direct materials, direct labor, and overhead costs. Additionally, any difference between the actual number of units produced and the expected number of units produced is reflected in the production volume variance, which is also included on the income statement. Therefore, fixed factory overhead costs appear on the absorption-costing income statements as both part of cost of goods sold and a production volume variance.

Fixed Factory Overhead Costs Appear on the Absorption-Costing Income Statements