Which statement is correct about absorption costing?
A)Under this method, fixed overhead is considered a product cost because production cannot take place without these costs.
B)Under this method, fixed overhead is considered a period cost because such costs do not vary according to production level.
C)Under this method, variable overhead is considered a period cost because such costs do not vary according to production level.
D)Under this method, selling costs are considered a product cost because such costs do not vary according to production level.

Question

Quizplus · Accepted Answer

Under absorption costing, fixed overhead is considered a product cost because these costs are necessary for production to take place. Variable overhead and selling costs are considered period costs because they do not directly create or contribute to the production of a product.

Which Statement Is Correct About Absorption Costing