Final answer:
The correct formula for applying overhead to a job is the predetermined overhead rate multiplied by the amount of allocation base incurred by that job, demonstrating a common method of spreading fixed costs known as overhead across units produced.
Step-by-step explanation:
The correct formula for applying overhead to a specific job is C. predetermined overhead rate × amount of allocation base incurred by the job. This means a rate, usually established before the period begins, is multiplied by the actual amount of the allocation base recorded by the job to assign the overhead cost.
When discussing fixed costs or overhead, if you divide these costs by the quantity of output produced, you calculate the average fixed cost. For example, if the fixed cost is $1,000, as you produce more goods, the cost per unit decreases because the total fixed cost is spread over an increasing number of units. This demonstrates the concept of "spreading the overhead". Consequently, the average fixed cost curve would be a hyperbola, decreasing as the quantity of output increases.