What Is the Difference Between Full Absorption Costing and Variable

question 93

Multiple Choice

What is the difference between full absorption costing and variable costing?

• A)In full absorption costing,all of the non-manufacturing costs are expensed.In variable costing,all of the non-manufacturing expenses are included in the cost of the product.
• B)In full absorption costing,fixed manufacturing overhead is expensed.In variable costing,fixed manufacturing overhead is included in the cost of the product.
• C)In full absorption costing,fixed manufacturing overhead is included in the cost of the product.In variable costing,fixed manufacturing overhead is expensed.
• D)Variable costing must be used for external financial reports while full absorption costing can only be used for internal reporting.

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Definitions:

Fair-value Hedge

A strategy used in accounting to mitigate the risk of changes in the fair value of an asset, liability, or firm commitment through derivative contracts.

Cash-flow Hedge

A hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with an asset or liability or a forecasted transaction.

Purchase Order

An official document issued by a buyer committing to pay the seller for the sale of specific products or services.

Fair-value Hedge

A hedge of the exposure to changes in the fair value of an asset or liability or an unidentified firm commitment that could affect profit or loss.