Question

A basic cost accounting method in which fixed factory overhead is added to inventory is

• A. Direct costing
• B. Absorption costing
• C. Process costing
• D. Variable costing

Answer 1

The correct option is B Absorption costing

Absorption costing allocates fixed overhead costs to a product whether or not it was sold in the period. This type of costing means that more cost is included in the ending inventory, which is carried over into the next period as an asset on the balance sheet.