The Full Cost of a Cost Object Includes Direct Costs

question 39

True/False

The full cost of a cost object includes direct costs plus allocated indirect costs.

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Definitions:

Variable Costing

An accounting method that only considers variable costs (costs that change with production levels) in determining product cost, excluding fixed costs.

Gross Margin

A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. It indicates the efficiency with which a company uses its materials and labor to produce and sell products profitably.

Absorption Costing

A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - in the cost of a product.

Manufacturing Margin

The difference between the sales revenue generated from manufactured goods and the cost of goods sold (COGS) associated with producing those goods.