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Which costing method includes both fixed and variable costs in product costing?

Practice Questions

Q1
Which costing method includes both fixed and variable costs in product costing?
  1. Absorption Costing
  2. Marginal Costing
  3. Activity-Based Costing
  4. Standard Costing

Questions & Step-by-Step Solutions

Which costing method includes both fixed and variable costs in product costing?
  • Step 1: Understand what costing methods are. Costing methods are ways to calculate the cost of producing a product.
  • Step 2: Learn about fixed costs. Fixed costs are expenses that do not change with the level of production, like rent or salaries.
  • Step 3: Learn about variable costs. Variable costs are expenses that change with the level of production, like materials or labor.
  • Step 4: Know that there are different costing methods. Two common methods are absorption costing and variable costing.
  • Step 5: Identify absorption costing. Absorption costing is a method that includes both fixed and variable costs in the total cost of a product.
  • Step 6: Conclude that absorption costing is the method that includes both types of costs.
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