Which Statement Is Correct About Variable Costing

question 12

Multiple Choice

Which statement is correct about variable costing?

• A)Under this method, fixed overhead is considered a product cost because production cannot take place without these costs.
• B)Under this method, fixed overhead is considered a period cost because such costs do not vary according to production level.
• C)Under this method, variable overhead is considered a period cost because production cannot take place without these costs.
• D)Under this method, selling costs are considered a product cost because production cannot take place without these costs.

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Definitions:

Binding Price Floors

Government-imposed price minimums that are set above the equilibrium price, causing surpluses in the market.

Binding Price Ceilings

Government-imposed price limits that are set below the market equilibrium price, leading to shortages.

Market Efficiency

A condition in which market prices fully reflect all available information and assets are priced accordingly.

Price Ceiling

A government-imposed limit on how high a price can be charged on a product or service, typically set below the equilibrium price to make goods more affordable.