Under absorption costing, the fixed cost of manufacturing is deferred to some ___________?
Correct answer: B. future period
- A. present period
- B. future period
- C. yearly period
- D. monthly period
Explanation
Absorption costing includes fixed manufacturing overhead in inventory, so that cost is deferred until the inventory is sold in a future period. This is why production exceeding sales can increase current income.
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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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