Question

Under absorption costing, fixed manufacturing overhead costs are a ________ cost.

a. carried in a liability account.
b. carried in an asset account.
c. ignored.
d. immediately expensed as a period cost.

Answer 1

b. carried in an asset account.

Step-by-step explanation:

Under the variable costing method, manufacturing overheads are expensed in the period they are incurred, hence, the last option is wrong.

Also,there is no costing method wherein manufacturing overheads expenses are ignored, as a result, option c is also obviously incorrect.

The treatment of manufacturing overheads using absoprtion costing is they are added to the cost of products which are also shown in the balance sheet as an asset .