The two main methods for dealing with fixed costs in relation to the production of inventory are:
A) Variable costing and incremental costing.
B) Absorption costing and direct costing.
C) Overhead costing and ABC costing.
D) Relevant costing and incremental costing.
E) None of the given answers.

Question

Quizplus · Accepted Answer

The two main methods for dealing with fixed costs in relation to the production of inventory are absorption costing and direct costing. Absorption costing assigns all manufacturing costs, including fixed costs, to the units produced whereas, direct costing assigns only variable costs to the units produced and treats fixed costs as period expenses. Both methods have their advantages and disadvantages and should be used based on the company's requirements and the management's decision.

The Two Main Methods for Dealing with Fixed Costs in Relation