Consider the following statements about absorption-cost pricing formulas:
I. Absorption-cost formulas consider a company's fixed manufacturing costs when establishing a selling price.
II. Absorption-cost formulas are often justified on the grounds that a company must cover all of its costs in the long run.
III. Absorption-cost data are the type that managers need when facing certain pricing decisions, such as whether or not to accept a special order.
Which of the above statements is (are) true?
A) II only.
B) I and II.
C) I and III.
D) II and III.
E) I, II, and III.

Question

Quizplus · Accepted Answer

Absorption-cost pricing considers fixed manufacturing costs (I) and is justified by the need to cover all costs in the long run (II). However, it may not be suitable for special order decisions (III).

Consider the Following Statements About Absorption-Cost Pricing Formulas