The absorption approach to the computation of manufacturing cost differs from the contribution approach because the absorption approach includes _____.
A)variable selling and administrative costs
B)fixed overhead
C)all fixed costs
D)all selling and administrative costs

Question

Quizplus · Accepted Answer

The absorption approach includes fixed overhead costs in the computation of manufacturing cost, while the contribution approach only considers variable costs. Variable selling and administrative costs (Option A) and all selling and administrative costs (Option D) are not included in either approach. Option C's statement that all fixed costs are included is incorrect as the contribution approach only includes fixed costs that are directly attributed to production, not all fixed costs.

The Absorption Approach to the Computation of Manufacturing Cost Differs