Final answer:
It is true that absorption costing includes fixed manufacturing overhead (FMOH) while variable costing does not, as absorption costing accounts for all manufacturing costs in product pricing, whereas variable costing only includes variable manufacturing costs.
Step-by-step explanation:
The statement that absorption costing includes fixed manufacturing overhead (FMOH) whereas variable costing does not is true. Absorption costing, also known as full costing, is a method of inventory costing that includes all manufacturing costs: direct materials, direct labor, and both variable and fixed manufacturing overheads in the cost of a unit of product. This is in contrast to variable costing, also known as direct costing or marginal costing, which only incorporates variable manufacturing costs—those costs that vary with production, such as direct materials, direct labor, and variable manufacturing overhead—into the unit product cost. Fixed costs, such as rent, salaries, and equipment depreciation, are treated as period costs and are expensed in the period they are incurred under variable costing.
Total costs can be decomposed into fixed costs, which are the costs of fixed inputs and do not change in the short-run regardless of the level of production, and variable costs, which change with the level of output. For example, the cost of hiring barbers in a barber shop or the expenses related to monitoring an internet service system are variable costs that would be accounted for differently in absorption and variable costing.