Final answer:
The cost of goods sold before adjustments for overhead variance is the d) normal cost of goods sold. Spreading the overhead refers to allocating fixed costs over a larger number of units, lowering the average fixed cost per unit as output increases, which is illustrated by a declining average fixed cost curve.
Step-by-step explanation:
The cost of goods sold, before any adjustments are made for an overhead variance, is called the normal cost of goods sold. This figure includes direct materials, direct labor, and the allocated share of manufacturing overhead, based on the normal overhead rate, rather than the actual overhead incurred. Overhead, or fixed cost, is a term commonly used in business accounting and cost management. When we talk about the concept of 'spreading the overhead,' we're referring to the process of allocating the overhead costs across the quantity of goods produced. In other words, spreading the overhead effectively reduces the average fixed cost per unit as the quantity of output increases. If we have a fixed cost, such as $1,000, and we increase the quantity of output, the average fixed cost curve will show a hyperbolic shape, declining as output goes up. This illustrates the concept of spreading the overhead because as we produce more, each unit bears a smaller portion of the fixed cost.