The reporting method that includes in the cost of inventory (and cost of goods sold)all product costs,including both fixed and variable costs,is known as:
A) variable costing.
B) total costing.
C) direct costing.
D) absorption costing.

Question

Quizplus · Accepted Answer

Absorption costing is a method that includes all product costs, both fixed and variable, in the cost of inventory and cost of goods sold. Under this method, fixed manufacturing overhead costs are absorbed into the product costs, along with direct materials, direct labor, and variable manufacturing overhead costs. This results in a higher cost of inventory and cost of goods sold compared to variable costing, which only includes variable costs. Therefore, option D is the correct answer.

The Reporting Method That Includes in the Cost of Inventory