Which of the following statements is true regarding absorption costing?

A) It is not the traditional costing approach.
B) It is not permitted to be used for financial reporting.
C) It is not permitted to be used for tax reporting.
D) It assigns all manufacturing costs to products.
E) It requires only variable costs to be treated as product costs.

Absorption Costing

Absorption costing is a costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Manufacturing Costs

Expenditures that are directly tied to the production of goods, including raw materials, labor, and overhead expenses.

Financial Reporting

The process of producing statements that disclose an organization's financial status to management, investors, and the government.