The distinction between variable costs and fixed costs is highlighted in variable costing via the contribution-margin format while the distinction between manufacturing and nonmanufacturing costs is central to absorption and is highlighted by the gross-margin format.

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The statement is correct. Variable costing focuses on separating variable costs (those that vary with production levels) from fixed costs (those that do not vary with production levels) using the contribution-margin format. Absorption costing, on the other hand, allocates all manufacturing costs (both variable and fixed) to units produced using the gross-margin format. Nonmanufacturing costs are not included in the cost of goods sold under absorption costing.

The Distinction Between Variable Costs and Fixed Costs Is Highlighted