The only difference between variable and absorption costing is the treatment of variable overhead costs.

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Quizplus · Accepted Answer

Variable costing and absorption costing differ in their treatment of not only variable overhead costs, but also fixed overhead costs. Under variable costing, only variable production costs (direct materials, direct labor, and variable overhead) are assigned to products, while fixed overhead costs are treated as period costs and expensed in the current period. Under absorption costing, both variable and fixed overhead costs are assigned to products, resulting in a higher cost of goods sold and lower net income in periods of low production volume.

The Only Difference Between Variable and Absorption Costing Is the Treatment