Question

Better Products Company manufactures insulation and applies manufacturing overhead costs to production at a budgeted indirect?

Answer 1

The average fixed cost curve is a downward sloping curve that represents the relationship between the quantity of output produced and the average fixed cost. Spreading the overhead means distributing the fixed costs over a larger quantity of output.

Step-by-step explanation:

The average fixed cost curve is a downward sloping curve that represents the relationship between the quantity of output produced and the average fixed cost. As the quantity of output increases, the average fixed cost decreases. In this case, if the fixed cost is $1,000 and the quantity of output produced is divided by the fixed cost, the average fixed cost will decrease as the quantity of output increases.

Spreading the overhead means distributing the fixed costs over a larger quantity of output. This is achieved by increasing production, which leads to a decrease in average fixed cost. By spreading the overhead, companies can reduce their average fixed cost per unit of output.