ACCA MA · Chapter 7 · Question 7 of 11
Which of the following statements about absorption costing is correct?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) It is consistent with IAS 2 Inventories, which requires inventory to include a share of production overheads
Explanation
IAS 2 requires inventory to be valued at cost, including a systematic allocation of fixed and variable production overheads based on normal capacity. Absorption costing does this. Treating fixed overheads as period costs is a feature of marginal costing.
More Absorption and marginal costing MCQs
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