Question

All of the following are inventoried under absorption costing except:

direct labor. sales commissions.
machine lubricant used in production.
raw materials used in production.
utilities cost consumed in manufacturing.

Answer 1

Answer:

The correct answer is letter "B": sales commissions.

Explanation:

Absorption costing assumes that all the costs related to the manufacturing process have been assigned to all the units assigned. This implies the costs of final products already reflect the expenditures on direct materials, direct labor, variable and fixed overhead.

Administrative wages or sales commissions are inventoried under the absorption costing method.