How to Calculate the Amount of Fixed Overhead Deferred Under Absorption Costing

What amount of fixed overhead is deferred to a future period under absorption costing?

A. $169,000

B. $162,000

C. $344,500

D. $175,500

Answer:

The amount of fixed overhead deferred under absorption costing is $175,500.

Under absorption costing, fixed overhead costs are allocated to each unit produced and are included in the cost of goods sold. To calculate the fixed overhead cost deferred to a future period, we need to determine the difference between the actual fixed overhead cost and the allocated fixed overhead cost based on the number of units sold.

The fixed manufacturing overhead cost is $344,500. The allocated fixed overhead cost per unit can be calculated by dividing the total fixed manufacturing overhead cost by the number of units produced: $344,500 / 26,500 units = $13 per unit.

Next, we calculate the allocated fixed overhead cost for the units sold: $13 per unit * 13,000 units sold = $169,000. To find the deferred fixed overhead cost, we subtract the allocated fixed overhead cost for the units sold from the total fixed manufacturing overhead cost: $344,500 - $169,000 = $175,500.

Therefore, the amount of fixed overhead deferred to a future period under absorption costing is $175,500.