Variable Selling and Administrative Costs Are Excluded from the Cost

question 423

True/False

Variable selling and administrative costs are excluded from the cost base used to set a selling price under the absorption approach to cost-plus pricing described in the text.

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Definitions:

Business Organizations

Formal entities set up for the purpose of conducting trade or providing services, following a particular operating structure and goals.

Partnership

A legal form of business operation between two or more individuals who share management and profits.

Corporation

A legal entity that is separate from its owners, offering limited liability to its shareholders, and is capable of entering contracts, suing and being sued.

Account Payable

The sum of funds that a business needs to pay back to its vendors or lenders for products or services bought on a credit basis.