Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 56

When management uses the absorption costing approach, fixed manufacturing overhead costs are classified as which of the following types of costs?

Answer options

• A. Direct product costs.
• B. Indirect product costs.
• C. Direct period costs.
• D. Indirect period costs.

Correct answer: B

Explanation

The correct answer is B, as fixed manufacturing overhead costs are not directly attributable to specific units of product and are therefore considered indirect. Options A and C refer to costs that can be directly traced to products or periods, while option D does not accurately represent the classification of fixed manufacturing overhead in the context of absorption costing.