Which of the following reflects the primary difference between variable and absorption costing?
A) inclusion of fixed selling expenses in period costs
B) inclusion of fixed selling expenses in product costs
C) inclusion of fixed manufacturing overhead in product costs
D) inclusion of variable manufacturing overhead in period costs

Question

Quizplus · Accepted Answer

The primary difference between variable and absorption costing is the treatment of fixed manufacturing overhead costs. Under variable costing, fixed manufacturing overhead costs are treated as period costs and expensed in the period in which they are incurred. In contrast, under absorption costing, fixed manufacturing overhead costs are included in the product costs and remain in the inventory until the products are sold. Choices A, B, and D are not correct as they do not reflect the primary difference between variable and absorption costing.

Which of the Following Reflects the Primary Difference Between Variable