Which of the following is true about absorption costing?
A)No fixed factory overhead is charged to production.
B)It is also known as direct costing.
C)The term used to designate the difference between sales and cost of goods sold is the "manufacturing margin."
D)Overapplied factory overhead is reflected in the income statement as a reduction cost of goods sold.

Question

Quizplus · Accepted Answer

Absorption costing includes all manufacturing costs, including fixed factory overhead, in the cost of goods sold. It is not known as direct costing; that term refers to variable costing. The term "manufacturing margin" is not specifically associated with absorption costing. Overapplied factory overhead in absorption costing is indeed reflected in the income statement as a reduction in the cost of goods sold, making option D correct.

Which of the Following Is True About Absorption Costing