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:

Discount Rate

The interest rate used in discounted cash flow (DCF) analyses to determine the present value of future cash flows.

Simple Rate

An interest calculation method where the interest charge is calculated only on the principal amount, without compounding.

Net Operating Income

A company's income after operating expenses have been subtracted but before income taxes and interest are deducted.

Initial Investment

The amount of money used to start a project, purchase an asset, or initiate operations in a business.