Under the Absorption-Cost Approach, All of the Following Are Included

question 80

Multiple Choice

Under the absorption-cost approach, all of the following are included in the cost base except

• A) direct materials.
• B) fixed manufacturing overhead.
• C) selling and administrative costs.
• D) variable manufacturing overhead.

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Definitions:

Credit Sales

Sales for which payment is not received at the time of the transaction but is expected to be received at a later date.

Finished Goods Inventory

Products that are completed and ready for sale but have not yet been sold to customers.

Required Production

The amount of product that must be produced in a specified period to meet customer demand and inventory policy.

Cash Collections

The process of gathering and accounting for all cash received by a business during a specific period of time.