A-LevelAccountingTraditional costing methods9706/12 · Oct/Nov 2011 · Q281 Mark

What is a benefit of using absorption costing?

AIt allows a business to calculate the break-even point for production.

BIt allows a business to calculate the total cost of goods produced.

CIt allows a business to show a lower value for year end inventory.

DIt allows decision-making on utilising spare capacity by increasing production.

✓ Correct answer

B: It allows a business to calculate the total cost of goods produced.

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Topic: Traditional costing methods, A-Level Accounting (syllabus 9706). Multiple choice, 1 mark.
Source: A-Level Accounting, Oct/Nov 2011 Paper 1 Variant 2, question 28.

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