Question

What does a cost card under absorption costing look like?

A. Includes only variable costs.
B. Includes only fixed costs.
C. Includes both variable and fixed costs.
D. Excludes all costs.

Answer 1

A cost card under absorption costing includes both variable and fixed costs to determine the total production cost of a product.

Step-by-step explanation:

A cost card under absorption costing will include both variable and fixed costs. These are the essential components for determining the total production cost of a product. Variable costs fluctuate with production volume, such as raw materials and labor. Fixed costs, on the other hand, remain constant regardless of production levels, such as rent on a factory or equipment leases. An example is The Clip Joint barber shop, where the fixed costs for space and equipment are $160 per day while the variable costs are dependent on the number of barbers hired at $80 each per day.