(CMA)Which Method of Inventory Costing Treats Direct Manufacturing Costs and Manufacturing

question 51

Multiple Choice

(CMA) Which method of inventory costing treats direct manufacturing costs and manufacturing overhead costs, both variable and fixed, as inventoriable costs?

• A)Direct costing
• B)Variable costing
• C)Absorption costing
• D)Conversion costing.

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Definitions:

Variable Costing

An accounting method where only variable production costs are included in product costs, with fixed overhead treated as a period cost.

Net Operating Income

A monetary measurement that determines an organization's profit by deducting operational costs from its operational revenue.

Absorption Costing

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

Contribution Format

A way of presenting an income statement where variable and fixed costs are shown separately, highlighting the contribution margin.