Which of the Following Statements Is Correct Using the Direct

question 1

Multiple Choice

Which of the following statements is correct using the direct costing concept?

• A)All manufacturing costs are included in the calculation of cost of goods manufactured.
• B)Only fixed costs are included in the calculation of cost of goods manufactured, while variable costs are considered period costs.
• C)Only variable manufacturing costs are included in the calculation of cost of goods manufactured, while fixed costs are considered period costs.
• D)All manufacturing costs are considered period costs.

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Definitions:

Owner's Equity

The residual interest in the assets of the entity after deducting liabilities, often referred to as shareholders' equity or net worth.

Net Income

Net income is the ultimate profit a company achieves after subtracting all taxes, expenses, and costs from its total income.

Commercial Substance

A situation where the future cash flows of a business are expected to change significantly as a result of a transaction.

Plant Assets

Long-term tangible assets used in the operation of a business that are not intended for sale.