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:

Original Investments

The initial amount of money put into purchasing assets or starting a venture, setting the foundation for future growth or income.

Net Income

The total profit or loss a company, generates after all expenses, taxes, and costs have been deducted from total revenue.

Salary Allowances

Specific amounts allocated regularly, often monthly, for salaries, including any adjustments for benefits or deductions.

Capital Account Increase

A rise in the value of an entity’s capital account, representing either an influx of capital or an increase in the overall value of the entity's assets.