Q-21-7RQ - Horngren'S Financial And Managerial Accounting

Question

Explain why the fixed manufacturing overhead cost per unit changes when there is a change in the number of units produced.

Step-by-Step Solution

Answer

Answer

 

Fixed manufacturing overhead cost per unit changes with a change in the number of units because total fixed cost remains constant and fixed manufacturing overhead cost per unit has an inverse relation with the number of units.

 

Step 1: Fixed manufacturing overhead

Fixed manufacturing overheads are the sunk cost to the company which remains constant in total and do not show deviation in total with the change in production level.

Step 2: Why does the fixed manufacturing overhead cost per unit change when there is a change in the number of units produced.

The fixed manufacturing overhead cost per unit changes with change in number of units produced because fixed manufacturing overhead remains constant in total and fixed manufacturing overhead cost per unit has an inverse relation with the number of units.