Which of the following statements is false regarding absorption costing?
A) Variable overhead is treated as a product cost.
B) Absorption costing is required for external financial statements prepared in accordance with generally accepted accounting principles (GAAP).
C) Fixed overhead is treated as a product cost.
D) Fixed overhead is expensed in the period incurred.

Question

Quizplus · Accepted Answer

In absorption costing, fixed overhead is treated as a product cost and included in the cost of goods sold. It is not expensed in the period incurred. This is the key difference between absorption costing and variable costing, where fixed overhead is expensed in the period incurred.

Which of the Following Statements Is False Regarding Absorption Costing