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Unformatted text preview: on a product-by-product basis. Fixed Overhead is one constant number so if you had a cost of $18000 and made only one item, then you would have an $18000 over head cost, not including how much it actually cost to make it. Now, if you were to make 18000 items, then you would only have $1 for your overhead cost per item. Now, the difference comes from which method you used to find your Net Income. If you used the absorption method then you would only report the overhead per unit you sold . If we were to expound on the previous example, and you had an OH cost of $18000 and you produced 18000 items, but only sold 15000 items, then only the $15000 will be taken away from the bottom line. The $3000 will be added to the Net Income. Therefore increasing the reported Net Income to your customers. Sincerely, Blake Best Accounting Consultant...
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This note was uploaded on 04/15/2008 for the course GEOL 1401 taught by Professor Thomasbush during the Spring '08 term at Dallas Baptist.
- Spring '08