Absorption costing
A) Is used for external reporting purposes
B) Includes variable and fixed period costs in inventory
C) Is the method in which the fixed overhead cost is not included in inventory
D) Treats production costs as expenses in the period in which they are incurred

Question

Quizplus · Accepted Answer

Absorption costing is typically used for external reporting purposes as it is required by accounting standards. It involves allocating both variable and fixed manufacturing costs to products and including those costs in inventory. This is in contrast to variable costing, which only includes variable costs in inventory and treats fixed manufacturing costs as period expenses.

Absorption Costing