Income Reported Under Absorption Costing and Variable Costing Is

question 5

Multiple Choice

Income reported under absorption costing and variable costing is:

• A) always the same.
• B) typically different.
• C) always higher under absorption costing.
• D) always higher under variable costing.
• E) always the same or higher under absorption costing.

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Definitions:

Indirect Materials

Components or supplies used in the production process that cannot be directly traced to a finished product.

Manufacturing Overhead

All indirect costs associated with manufacturing a product, excluding direct material and direct labor costs.

Raw Materials

The unprocessed materials used in manufacturing to produce goods, ranging from metals and plastics to food ingredients and textiles.

Indirect Materials

Materials used in the production process that cannot be directly linked to specific products, such as lubricants for machinery.