4. Which of the following is the key argument in favor of absorption costing?

a.	Absorption costing overstates the balance sheet value of inventories.
b.	Variable factory overhead is a period cost.
c.	Fixed manufacturing overhead is difficult to allocate properly. D. Fixed manufacturing overhead is necessary for the production of a product.

5. The key argument in favor of direct costing is that fixed manufacturing overhead costs should be accounted for as a period cost. What is the rationale behind this?

A. Fixed manufacturing overhead costs occur regardless of level of production and are, therefore, a function of time.

B. Fixed manufacturing overhead costs are generally immaterial in amount.

C. Allocation of fixed manufacturing costs is arbitrary at best.

D. Fixed manufacturing costs in total change as production changes