When Absorption Costing Is Used for the Income Statement,the Difference

question 12

Multiple Choice

When absorption costing is used for the income statement,the difference between sales and ________ is gross margin.

• A) manufacturing cost of goods sold
• B) selling expenses
• C) selling and administrative expenses
• D) variable expenses

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Definitions:

Accounts Payable

Accounts payable are amounts a company owes to suppliers for items or services purchased on credit; it is a current liability on the balance sheet.

Nominal Annual Cost

The cost of a product or service stated in current year prices without adjusting for inflation or deflation.

Trade Credit

A type of commercial financing where suppliers allow customers to purchase goods or services and pay for them at a later date.

Purchase Date

The date on which an asset or security was bought.