Under Absorption Costing, Fixed Manufacturing Overhead Costs

question 150

Multiple Choice

Under absorption costing, fixed manufacturing overhead costs:

• A)are deferred in inventory when production exceeds sales.
• B)are always treated as period costs.
• C)are released from inventory when production exceeds sales.
• D)are ignored.

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Definitions:

Variable Cost

Expenses that fluctuate with the level of output, including costs like materials and labor directly involved in the production.

Kilowatt/Hour

A unit of energy equivalent to one kilowatt of power expended for one hour.

Production Workers

Employees directly involved in the manufacturing process, responsible for converting raw materials into finished goods.

Merchandising Company

A business that purchases goods wholesale and resells them at retail, making a profit on the markup.