Fixed Overhead in Full Costing

Absorption Costing
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Frank Forsberg, Sweden

Fixed Overhead in Full Costing

What does "fixed overhead is a product cost until the products are sold" mean?


Michela Arno
Financial Consultant, Netherlands

Fixed Overhead in Full Costing System

Hi Frank, it just means that fixed overhead is capitalized into the product, which means it increases the inventory value, until the inventory is sold.
When the product is sold, fixed overhead is expensed and, as a result, it is credited from the balance sheet and debited as expense in the P&L of the period.

john paul
Accountant, Kenya

What is Fixed Overhead Cost?

A fixed overhead is defined as a cost that is incurred in the (production) process that neither changes nor varies with the production volume.


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