alleryStart learning →Absorption costing applies all direct costs, fixed overhead and variable overhead to the:
ARent of the building
BCost of the product
CCost of the auditor
DWage of the manager
Answer & Solution
Correct answer: B. Cost of the product
1. Absorption costing is also called full costing for a reason.
2. It applies all direct costs, fixed overhead, and variable manufacturing overhead.
3. All of that goes to the cost of the product.
4. So the product absorbs everything.
_Source: OpenStax Principles of Accounting Volume 2, Managerial Accounting (CC BY-NC-SA 4.0), Ch 6 'Activity-Based, Variable, and Absorption Costing', sections 6.1-6.5_
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