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

Question

Business

Alonzo Middleton

11 November, 15:11

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

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Answers (1)

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Foxy Mama · Answer 1

C. It considers fixed manufacturing overhead cost as product costs.

Explanation:

The statement that is true of absorption costing is that it considers fixed manufacturing overhead cost as product costs.

Absorption costing uses the concept of cost drivers to ascertain the quantum of fixed manufacturing overhead cost a product generates, and ties that fraction to the product as its own cost.

By so doing, what would ordinarily have been periodic costs that will be apportioned among products become fixed costs that are directly traceable to those products.