CMA Intermediate · Cost Accounting · Overheads
In a factory, the rent of the production building is Rs 1,20,000 per year and does not change with the level of output within the normal range. How is this overhead classified on the basis of behaviour?
Factory building rent that stays the same in total whatever the output within the normal range is a fixed overhead. Its total does not move with volume, unlike variable overhead, and it has no variable element, so it is not semi-variable.
- AVariable overhead
- BFixed overheadCorrect
- CSemi-variable overhead
- DControllable variable overhead
Explanation
Rent stays constant in total over the relevant range of output, so it is a fixed overhead. Variable overheads change in proportion to output, and semi-variable ones have both fixed and variable parts, which rent does not.
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