Final answer:
The statement that allocated overhead costs should equal actual costs each month is false as actual costs incurred can vary. The average fixed cost curve is downward sloping because as output increases, the fixed cost is spread over more units, leading to lower average costs per unit.
Step-by-step explanation:
The statement that overhead costs allocated each month are expected to equal actual overhead costs incurred each month is false. Overhead costs are indeed a common name for fixed costs. Allocating overhead costs means distributing the estimated costs over the expected output, which does not always match the actual costs incurred. The average fixed cost can be calculated by dividing the fixed cost, like overhead, by the quantity of output produced.
For example, if a fixed cost is $1,000, and we divide that by the quantity of output, the average fixed cost curve would represent the average fixed cost for each unit of output. This curve is typically downward sloping because, as production increases, the same amount of fixed cost is spread over a larger quantity of output — a concept known as spreading the overhead. This spreading leads to a reduction in the average fixed cost per unit as production volume increases.