How Are Costs Classified When Calculating the Absorption-Costing Income for External

question 220

Multiple Choice

How are costs classified when calculating the absorption-costing income for external reporting?

• A)Manufacturing costs ultimately become nonmanufacturing costs.
• B)Manufacturing costs are product costs and product costs are never expensed.
• C)Costs of selling manufactured products are classified as product costs.
• D)Selling and administrative costs are classified as nonmanufacturing costs.

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Definitions:

Note Matures

The point in time when a promissory note, bond, or other financial instrument's principal is due to be paid back.

Financial Statement

A written report which quantitatively describes the financial health of a company; it includes the income statement, balance sheet, statement of cash flows, and statement of retained earnings.

Normal Balance

The side (debit or credit) of an account that is expected to have a higher balance based on the accounting rules.

Temporary/Permanent

Categories used to distinguish assets, liabilities, and equity items based on their duration in financial statements; temporary items fluctuate regularly while permanent items typically remain constant over time.