The Only Difference Between Variable and Absorption Costing Is the Expensing

question 71

Multiple Choice

The only difference between variable and absorption costing is the expensing of:

• A)direct manufacturing costs
• B)variable marketing costs
• C)fixed manufacturing costs
• D)Both A and C are correct.

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of the business.

Current Liabilities

Current liabilities are financial obligations a company is due to pay within one year, including accounts payable, short-term debts, and other similar liabilities.

Proportion

A segment, piece, or amount looked at in relation to the entirety.

Acid-test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its quick assets, providing insight into its short-term liquidity without relying on inventory assets.