Absorption Costing Includes Both Fixed and Variable Costs When Computing

question 60

True/False

Absorption costing includes both fixed and variable costs when computing the cost of a
product.

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Definitions:

Fixed Costs Per Unit

Fixed costs per unit decrease as production increases because the total fixed costs are spread over a larger number of units.

Selling Price

The amount of money charged for a product or service, or the sum for which something is sold.

Margin of Safety

The difference between actual sales and the break-even point, indicating how much sales can fall before a business incurs a loss.

Fixed Expenses

Costs that do not vary with the level of production or sales, remaining constant over a period of time.