Which Inventory Costing Method Assigns Fixed Production Costs to Inventory

question 58

Multiple Choice

Which inventory costing method assigns fixed production costs to inventory so as to report the full cost of creating inventory?

• A) Variable costing
• B) Gross margin costing
• C) Full costing
• D) Absorption costing

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Definitions:

Job-Order Costing

A cost accounting system that accumulates costs according to specific jobs or orders, allowing for detailed cost tracking.

Manufacturing Cost

The total expense incurred in the production of goods, including direct materials, direct labor, and manufacturing overhead.

Machine-Hours

A measure of the amount of time machines are running in the production process, used as a basis for allocating overhead costs.

Manufacturing Overhead

All indirect costs related to the production process, such as maintenance, utilities, and quality control, not directly traceable to a product.