Under absorption costing, which cost is included in the cost of finished goods inventory?
Correct answer: A. Fixed manufacturing overhead
- A. Fixed manufacturing overhead
- B. Selling commission on sales
- C. Office rent for administration
- D. Interest on business loans
Explanation
Absorption costing assigns both variable and fixed manufacturing costs to products. Selling, administrative and financing costs are normally treated as period costs rather than inventory costs.
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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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