Absorption Costing Is a Method of Allocating Cost to Inventories

question 11

Multiple Choice

Absorption costing is a method of allocating cost to inventories such that the cost of inventory includes:

• A) both variable and fixed costs, irrespective of the level of operating capacity.
• B) an appropriate share of both variable and fixed costs with fixed costs being allocated based on normal operating capacity.
• C) all costs other than fixed costs based on normal operating capacity.
• D) both variable and fixed costs, both of which are allocated based on normal operating capacity.