Which of the Following Statements Is True of Absorption Costing

question 138

Multiple Choice

Which of the following statements is true of absorption costing?

• A) It considers variable selling and administrative costs as product costs.
• B) It considers fixed selling and administrative costs as product costs.
• C) It considers fixed manufacturing overhead cost as product costs.
• D) It considers variable manufacturing overhead cost as period costs.

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Definitions:

Capacity

In finance, the ability of an individual or organization to repay a loan or meet financial obligations.

Fixed Costs

Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance.

Selling Price

The fixed or negotiated amount at which a product or service is sold to customers.

Fixed Costs

Business costs that do not vary with the amount of goods produced or the volume of sales.