A possible criticism of ________ costing is that fixed manufacturing overhead is treated as a/an ________.
A)variable; asset
B)absorption; period cost
C)absorption; asset
D)variable; liability
E)absorption; variable cost in the long run

Question

Quizplus · Accepted Answer

Absorption costing treats fixed manufacturing overhead as an asset because it is included in the cost of the product and carried forward as inventory until the product is sold. This can lead to an overstatement of the value of inventory and profits in periods where production exceeds sales.

A Possible Criticism of ________ Costing Is That Fixed Manufacturing