A. Under absorption costing, all manufacturing costs are inventoried. This includes the prime costs (which include direct labor and direct materials), variable manufacturing overhead and fixed manufacturing overhead. In total, this is $1,060,000.
B. This answer does not include the manufacturing overheads, which are inventoried under absorption costing.
C. This answer includes the variable and fixed selling and other expenses (which should not be included) and does not include variable manufacturing overhead (which should be included).
D. This answer does not include the fixed manufacturing overhead, which is inventoried under absorption costing.
