What Is the Primary Difference Between Variable and Absorption Costing

question 3

Multiple Choice

What is the primary difference between variable and absorption costing?

• A)inclusion of fixed selling expenses in product costs
• B)inclusion of variable factory overhead in period costs
• C)inclusion of fixed selling expenses in period costs
• D)inclusion of fixed factory overhead in product costs

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Definitions:

Economic Profit

The difference between total revenue and total costs, where costs include both explicit and implicit costs.

Competitive Firm

A company that operates in a market where it must take the prevailing market price as given because the firm's individual sales do not significantly affect the market price.

Total Revenue

The total income generated by a firm from selling its goods or services, calculated as the price per unit times the number of units sold.

Output Units

Refers to the quantity of goods or services produced within a given time frame.