{"id":50117,"date":"2024-04-15T23:05:41","date_gmt":"2024-04-15T23:05:41","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=50117"},"modified":"2024-04-15T23:05:41","modified_gmt":"2024-04-15T23:05:41","slug":"under-absorption-of-overhead-expenses-in-cost-accounting-results-in-_________","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/under-absorption-of-overhead-expenses-in-cost-accounting-results-in-_________\/","title":{"rendered":"Under absorption of overhead expenses in cost accounting results in _________."},"content":{"rendered":"

[amp_mcq option1=”decrease in costing profit” option2=”decrease in financial accounts profit” option3=”increase in costing profit” option4=”increase in financial accounts profit” correct=”option1″]<\/p>\n

The correct answer is: A. decrease in costing profit<\/strong><\/p>\n

Absorption costing is a method of accounting for overhead costs in which all manufacturing costs, including overhead, are assigned to products. This is in contrast to variable costing, which only assigns variable costs to products.<\/p>\n

Under absorption costing, overhead costs are assigned to products based on a predetermined overhead rate. This rate is calculated by dividing the total estimated overhead costs for the period by the estimated total units produced.<\/p>\n

When overhead costs are assigned to products, they increase the cost of goods sold. This, in turn, reduces the gross profit margin. As a result, absorption costing typically results in a lower costing profit than variable costing.<\/p>\n

Here is a brief explanation of each option:<\/p>\n