Question

11. Under generally accepted accounting principles, absorption costing is used for

Job Costing     Process Costing

1.              Yes                      Yes
2.               No                       No
3.               No                       Yes
4.               Yes                      No

Answer 1

Answer:

Option a: Yes, Yes

Explanation:

Absorption costing refers to a system in which the fixed manufacturing costs are also included in the stock of finished goods along with the material, labor, and variable overheads.

In job costing, the different types of orders are received from customers and each order is different. Example: Customized chair, etc.

Processing costing refers to a system in which all the goods are made using a process. Example: Paper, sugar, etc.

Absorption costing, as per generally accepted accounting principles, is used for both job costing and process costing.

Hence, option 'a' is correct and rest all are incorrect.

In case of any doubt, please feel free to comment.