The underlying difference between absorption costing and variable costing lies in the treatment of:
A)direct labour.
B)variable manufacturing overhead.
C)fixed manufacturing overhead.
D)variable selling and administrative expenses.
E)fixed selling and administrative expenses.

Question

Quizplus · Accepted Answer

The difference between absorption costing and variable costing lies in the treatment of fixed manufacturing overhead. Absorption costing allocates fixed manufacturing overhead to each unit of product, while variable costing treats fixed manufacturing overhead as a period cost and does not assign it to individual units of product. The treatment of other costs, such as direct labor, variable manufacturing overhead, and selling and administrative expenses, is the same under both methods.

The Underlying Difference Between Absorption Costing and Variable Costing Lies