When the predetermined overhead rate is based on the level of activity at capacity, an item called the Cost of Unused Capacity may appear to be treated as a period expense on income statements prepared for internal management use.

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Tayler Mercier · Accepted Answer

Final Answer : True, Explanation :  The Cost of Unused Capacity is considered a period expense because it represents the fixed costs that are incurred even when production levels are below full capacity. As such, it is not directly related to the production of a specific product and is therefore treated as a period expense on internal management income statements.

When the predetermined overhead rate is based on the level of activity at capacity, an item called the Cost of Unused Capacity may appear to be treated as a period expense on income statements prepared for internal management use.

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