Which of the following is a true statement regarding absorption and/or direct co

Question

Which of the following is a true statement regarding absorption and/or direct costing? A. A firm can choose to use either absorption or direct costing for income tax purposes. B. A firm can choose to use either absorption or direct costing for financial reporting purposes. C. Direct costing assigns only direct materials and direct labor to products. D. Absorption costing includes fixed overhead in product costs whereas direct costing does not.

An organization's value chain refers to: A. the process of using cost information to manage the activities of the organization. B. the sequence of functions and related activities that add value for the customer. C. the process of collecting and recording valuable information in the accounting information system. D. None of the above.

An example of a cost likely to have a mixed behavior pattern is: A. sales force commission. B. raw material cost. C. depreciation of production equipment. D. electricity cost for the manufacturing plant.

Explanation / Answer

1)

D. Absorption costing includes fixed overhead in product costs whereas direct costing does not.

2)

B. the sequence of functions and related activities that add value for the customer

3)

B. raw material cost

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