Question

QUESTION 39

1. The income statement is organized by ________ under absorption costing.

   		variable costs only
   		fixed costs only
   		product and period costs
   		period costs only

Answer 1

The income statement is organised by Product and period costs Under absorption costing.

Answer : Product and Period cost

• Explanation

​ Under absorption costing, Income statement prepare by dividing cost into Period cost and Product cost.

• ​​​​​​​Poduct costs

​​​​​​​​​​​​​​ Under absorption costing Manufacturing cost ( Fixed + Variable ) Are treated as a poduct costs.

Example : Direct material, Direct labour, Variable overhead, Fixed overhead.

• Period costs

​​​​​​​ All cost that are not Product cost is period cost.

Example : selling overhead, General overhead, administrative overhead.