Absorption Costing

question 88

Multiple Choice

Absorption costing

• A)is not allowed under GAAP.
• B)is not allowed for external reporting purposes.
• C)may lead to poor business decisions
• D)highlights differences between variable and fixed costs.
• E)optimizes business decisions.

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Definitions:

Gross National Income

An economic metric that totals the domestic and foreign output of residents of a country, including product taxes and minus subsidies not included in the valuation of output.

APC

Average Propensity to Consume, which measures the fraction of income spent on consumption out of the total income.

Disposable Income

Financial endowment to households for the purpose of spending and saving after mandatory tax deductions.

Consumption

The use of goods and services by households. It represents the end-use of products and is a primary component of aggregate demand in an economy.