7.22 Ginnungagap in 2007. (40 min) This problem always generates active classroom discussion. 1 The treatment of fixed manufacturing overhead in absorption costing is affected primarily by what denominator level is selected as abase for allocating fixed manufacturing costs to units produced. In this case, is 10,000 tonnes per year, 20,000 tonnes or some other denominator level the most appropriate base We usually place the following possibilities on the board or overhead projector and then ask the students to indicate by vote how many used one denominator level rather than another. Incidentally, discussion tends to move more clearly if variable- costing profit statements are discussed first, because there is little disagreement as to calculations under variable costing.
