Question

The income statement prepared for external parties is referred to as absorption-costing income because all

a. selling and administration expenses are assigned to the product.
b. overheads are classified as fixed and variable overheads.
c. manufacturing costs are assigned to the period in which they are incurred.
d. manufacturing costs are fully assigned to the product.

Answer 1

The income statement prepared for external parties, known as absorption-costing income, assigns all manufacturing costs to the product.

Step-by-step explanation:

The correct answer is d. Manufacturing costs are fully assigned to the product. The income statement prepared for external parties, known as absorption-costing income, assigns all manufacturing costs to the product. This includes direct materials, direct labor, and both fixed and variable overhead costs. By fully assigning these costs to the product, absorption costing provides a comprehensive view of the cost of producing each unit, allowing for accurate pricing decisions and evaluation of profitability.