A reliable cost accounting system is necessary for accurate pricing.The traditional method of product costing,where the costs of direct materials,direct labor,and factory overhead are included,is called ________ costing.
A)absorption
B)break-even
C)direct
D)variable

Question

Quizplus · Accepted Answer

Direct costing only includes direct materials and direct labor in product costing, while variable costing includes direct materials, direct labor, and variable overhead in product costing. Break-even analysis is a tool used to determine the point at which total revenue equals total cost, while absorption costing includes direct materials, direct labor, and both fixed and variable overhead in product costing. Therefore, absorption costing is the traditional method of product costing that includes all three cost components.

A Reliable Cost Accounting System Is Necessary for Accurate Pricing