The Principal Difference Between Variable Costing and Absorption Costing Centers

question 148

Multiple Choice

The principal difference between variable costing and absorption costing centers on:

• A)whether variable manufacturing costs should be included in product costs.
• B)whether fixed manufacturing costs should be included in product costs.
• C)whether fixed manufacturing costs and fixed selling and administrative costs should be included in product costs.
• D)whether selling and administrative costs should be included in product costs.

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Definitions:

Par Value

Par value is the face value of a bond or stock as stated by the issuing company, which may differ from its market value; for stocks, it is often a nominal amount.

Coupon

The interest rate stated on a bond when issued, which is paid by the issuer to the bondholder at specified intervals until maturity.

Yield To Maturity

The total return anticipated on a bond if it is held until it matures, considering both interest payments and capital gains.

Real Rate

The expected return rate an investor anticipates, adjusted for inflation.