The difference between the absorption costing approach and the variable costing approach to measuring profit lies in the treatment of:
A)fixed overheads.
B)variable overheads.
C)direct material costs.
D)direct labor costs.

Question

Quizplus · Accepted Answer

The absorption costing approach includes all fixed manufacturing overhead costs in the cost of a product, while the variable costing approach only includes variable costs directly related to the production of the product. As a result, the treatment of fixed overhead costs is the key difference between the two approaches.

The Difference Between the Absorption Costing Approach and the Variable