Which of the following statements is TRUE of absorption costing?
A) It considers variable selling and administrative costs as product costs.
B) It considers fixed selling and administrative costs as product costs.
C) It considers fixed manufacturing overhead cost as product costs.
D) It considers variable manufacturing overhead cost as period costs.

Question

Quizplus · Accepted Answer

Absorption costing considers fixed manufacturing overhead cost as product costs and includes them in the cost of goods sold. Variable manufacturing overhead cost is also included as a product cost under absorption costing. Selling and administrative expenses, both fixed and variable, are treated as period costs and not included in the cost of goods sold.

Which of the Following Statements Is TRUE of Absorption Costing