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13. A fixed cost is a cost that remains constant, in total, regardless of changes in the level of activity. 14. Manufacturing overhead usually
13. A fixed cost is a cost that remains constant, in total, regardless of changes in the level of activity. 14. Manufacturing overhead usually includes various fixed costs such as depreciation, insurance, property taxes, rent, and supervisory salaries. 15. Cost behavior refers to how a cost reacts to changes in the level of activity. 16. A variable cost varies, in total, in direct proportion to changes in the level of activity. 17. Assume that a company paid $50,000 several years ago for a special-purpose machine. The machine was used to make a product that is now obsolete and is no longer being sold. The $50,000 should be considered in decision making. 18. Under variable costing, only those manufacturing costs that vary with output are treated as product costs. 19. Under variable costing, fixed manufacturing overhead is treated as a product cost. 20. Absorption costing treats all manufacturing costs as product costs, regardless of whether they are variable or fixed. 21. In absorption costing, fixed manufacturing overhead costs are included in work in process inventory. 22, Net operating income under absorption costing and net operating income under variable costing can be different. 23. Net operating incomes are same between absorption costing and variable costing because the two methods account for fixed manufacturing overhead identically.
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