Question

4) Under standard costing, ________.

A) fixed overhead costs are treated as if they are a variable cost
B) fixed overhead costs are treated as if they are a fixed cost
C) variable overhead costs are treated as if they are a fixed cost
D) fixed overhead costs are treated as if they are a sunk cost

Answer 1

Under standard costing, fixed overhead costs are treated as fixed costs, not variable or sunk costs, and do not change with the level of production.

Step-by-step explanation:

Under standard costing, fixed overhead costs are treated as if they are a fixed cost (B). Fixed costs are expenditures that do not change regardless of the level of production. This contrasts with variable costs, which a firm can change and are important for making decisions about current and future operations. A key characteristic of fixed costs is that they are often considered sunk costs, which means they have already been incurred and cannot be recovered. Therefore, they should not influence future economic decisions concerning production or pricing.