ECONOMICS

Detailed explanation-1: -Absorption costing is a method of costing that includes all manufacturing costs, both fixed and variable, in the cost of a product. It is also known as full costing or full absorption costing.

Detailed explanation-2: -Absorption costing treats all production costs as product costs, regardless of whether they are variable or fixed. Under absorption costing, a portion of fixed manufacturing overhead is allocated to each unit of product.

Detailed explanation-3: -Absorption costing means that all the manufacturing cost i.e. raw material, direct labor, direct expenses and overheads are absorbed by the units produced. Costs includes fixed as well as variable both.

Detailed explanation-4: -Correct answer: Option c. both variable and fixed manufacturing costs are considered product costs. Explanation: Under absorption costing, the variable manufacturing costs and the fixed manufacturing overhead are considered as product costs.

Detailed explanation-5: -Answer: Direct materials, direct labor, variable overhead, and fixed overhead. How: (An income statement under absorption costing includes all production costs including direct materials, direct labor, variable overhead, and fixed overhead.)