The principal difference between variable costing and absorption costing centers on:
A)whether variable manufacturing costs should be included in product costs.
B)whether fixed manufacturing costs should be included in product costs.
C)whether fixed manufacturing costs and fixed selling and administrative costs should be included in product costs.
D)whether selling and administrative costs should be included in product costs.

Question

Quizplus · Accepted Answer

The principal difference between variable costing and absorption costing is whether fixed manufacturing costs should be included in product costs. Under variable costing, only variable manufacturing costs are allocated to products, while fixed manufacturing costs are expensed in the period they are incurred. On the other hand, absorption costing charges all manufacturing costs, both variable and fixed, to the product.

The Principal Difference Between Variable Costing and Absorption Costing Centers