The difference between absorption and variable costing is the accountability of ___________?
Correct answer: C. fixed manufacturing cost
- A. direct overhead
- B. indirect overhead cost
- C. fixed manufacturing cost
- D. variable manufacturing cost
Explanation
The key difference is the treatment of fixed manufacturing overhead: absorption costing assigns it to inventory, whereas variable costing expenses it immediately. Direct and variable manufacturing costs are included under both methods.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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