Final answer:
The statement is true; overhead accounts are closed at the end of each year, resulting in their balances becoming zero as part of the closing entries in accounting. This ensures that the financial statements reflect accurate income and expenses for that year. In the context of a shutdown, only fixed costs would need to be paid if the center's revenues are zero.
Step-by-step explanation:
The statement that 'overhead accounts are closed or become zero at the end of each year' is true. In accounting, at the end of an accounting period, typically a year, overhead accounts such as indirect costs related to the running of a business are closed out. This involves transferring any balances in these accounts to the income summary account, effectively making the overhead account balances zero. This process is a part of closing entries, which are made to prepare the accounts for the next period. It ensures that revenues and expenses are accounted for in the period they are incurred.
In a situation where a center shuts down, and the revenues are zero, it still needs to pay any fixed costs, such as rent or salaries, which do not vary with production volume. In contrast, variable costs, which do change with production levels, would not be incurred during a shutdown. Decisions on whether to shut down now or later may involve analyzing how these costs and potential revenues affect the overall financial health of the business.