Absorption Costing – True or False

Practice Question

Intro to Managerial Accounting
Alternative Inventory Costing Methods
Absorption Costing
True or False

Absorption costing treats fixed manufacturing overhead as an expense in the period incurred.

Answer +
Correct Answer: FALSE
Explanation +

Under absorption costing, fixed manufacturing overhead is included in the cost of inventory and only expensed when the inventory is sold, affecting profit reporting based on inventory levels.