Exhibit 2-6 -In Moving from Point F to Point G in Exhibit

question 32

Multiple Choice

Exhibit 2-6
-In moving from point f to point g in Exhibit 2-6,the

• A)production of B increases without a change in the production of A
• B)production of A increases without a change in the production of B
• C)production of both A and B increase
• D)production of both A and B decrease
• E)production of B increases and production of A decreases

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Definitions:

Absorption Costing

is an accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Fixed Manufacturing Overhead

Costs related to manufacturing that do not vary with the level of production, such as rent, salaries, and utility costs for the factory.

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overhead) as part of the cost base of a product.

Variable Costing

An accounting method that includes only variable production costs in product costs and treats fixed overheads as period costs.