When absorption costing is used for the income statement,the difference between sales and ________ is gross margin.
A) manufacturing cost of goods sold
B) selling expenses
C) selling and administrative expenses
D) variable expenses

Question

Quizplus · Accepted Answer

Absorption costing includes all manufacturing costs in the cost of goods sold, including both variable and fixed costs. Therefore, the difference between sales and the manufacturing cost of goods sold (which includes both variable and fixed costs) is the gross margin. Selling expenses, selling and administrative expenses, and variable expenses are not included in the cost of goods sold and are deducted separately from gross margin to arrive at net income.

When Absorption Costing Is Used for the Income Statement,the Difference